Uponor starts transformation programme in its European segments to accelerate profitable growth

Uponor Corporation Stock exchange release 26 November 2015 14:00 EET

Uponor starts transformation programme in its European segments to accelerate profitable growth

Transformation programme in Building Solutions – Europe targets profitable growth, greater agility and cost reductions
Uponor Infra segment plans to consolidate operations to improve profitability
Uponor will have a live webcast on the transformation today at 15.00 EET. The webcast will be available through http://investors.uponor.com, and later on as a recorded video.

Uponor is beginning a transformation programme involving the operations and structure of its Building Solutions – Europe segment, in order to strengthen the segment’s basis for profitable growth. The programme will address the segment’s weak recent performance e.g. by means of initiatives targeted at accelerating sales and reducing costs. The measures with respect to Uponor Infra are related to the planned consolidation of manufacturing operations in Finland.

“Since the onset of the financial crisis in 2007, we have conducted various efficiency and streamlining programmes which have helped us respond to the major decline in market demand in the shorter term. Continued weak demand in the European building and civil engineering markets and declining sales with persistently high fixed costs have been eroding our profits in Europe. To achieve our strategic objectives, we need to make fundamental changes in our business and structure,” says Jyri Luomakoski, Uponor’s President and CEO.

In addition to the initiatives to grow net sales, the transformation programme as planned is also targeted at contributing a minimum of €25 million in operational savings in the consolidated financial accounts by the end of 2017. Of these savings, Building Solutions – Europe is seeking at least €20 million and Uponor Infra €5 million. In total, the measures are expected to incur €32 million in non-recurring items, of which €13 million will be non-cash, to be booked in the 2016 accounts for the most part. It is estimated that Building Solutions – Europe’s non-recurring items will total €21 million, of which €5 million will be non-cash, while Uponor Infra’s share will be €11 million, of which €8 million will be non-cash.

Clarity and agility through a simplified structure in Building Solutions – Europe

For Building Solutions – Europe, which has been under new management since 1 September, a key ambition is to generate profitable growth through a range of measures. Growth in Uponor’s established markets will be sought in the commercial sector in particular, where Uponor has made major inroads in selected markets over the last few years. For instance, Uponor will leverage its special knowhow on building energy management and the recently launched ready-to-install offerings more efficiently internationally. Uponor will continue its active investment in new offerings and plans to double innovation rate in the near-term future. Another focus area is a stronger entry in geographies where Uponor is presently under-represented, especially major capital regions.

A central part of the transformation is the evolution of a more consolidated and specialised manufacturing, warehousing and distribution network. Uponor plans to introduce a streamlined, hub-based operational model for central functions with fewer management layers and rapid decision-making. In this respect, the segment will review its decentralised back-office and support functions, which is likely to result in the closure of several smaller offices.

The transformation will have a significant impact on personnel numbers Europe-wide. Uponor estimates a maximum reduction of circa 300 full-time jobs in Europe, with a net impact of approximately 250 after new hires in places where additional work force is needed.

In an effort to support growth plans in Asia, Uponor has decided to begin its own manufacture of building solutions in China in 2016, to satisfy growing demand in this large market.

Uponor Infra aims at specialised sites to achieve operational savings

Since its establishment in July 2013, Uponor Infra has executed integration and streamlining programmes to reduce overlaps and improve profitability. While these initiatives have been completed successfully, the segment’s performance remains below an acceptable level, mainly due to the prolonged weak demand and tight competitive environment in Northern Europe.

The Uponor Infra segment will focus on selling higher added-value solutions in contrast to non-differentiating commodity offerings. The segment has completed a review of its manufacturing network and plans to focus activities in Vaasa, Finland on project competence, international projects and technology as well as district heating, employing around 80 persons. Plans have been made to consolidate all plastic pipe and chamber manufacturing operations to Nastola, Finland, by the end of 2016. The consolidation, mainly affecting the Vaasa unit, would mean a reduction of close to 170 full-time jobs, or a net reduction of circa 80 jobs depending on the final outcome.

A note to readers

In July, 2015 Uponor launched a streamlining programme in its Building Solutions – Europe segment in order to adjust operations to the slack demand environment in Europe. This programme has already resulted in a reduction of 70 jobs in Sweden and the UK, and a reduction of a further 30 jobs is being evaluated in Central Europe, resulting in total annual savings of around €3 million. It is estimated that these initiatives will incur a total of €4–€5 million in non-recurring costs, most of which will be booked during 2015.

The North American market has remained strong and Uponor’s building solutions business there is developing as expected. Uponor, Inc.’s manufacturing expansion in Apple Valley, Minnesota, is progressing according to plan and is targeted for completion in the current quarter.

Uponor will make every effort to support employees affected by the changes in both segments. Today, Uponor will begin the employee consultation processes in Finland, and later on in the other affected countries in accordance with local practices. Further details will be communicated when the plans are ready.

For further information, please contact:
Jyri Luomakoski, President and CEO, tel. +358 20 129 2824
Riitta Palomäki, CFO, tel. +358 20 129 2822 (after 16.00 EET)

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

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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