Financial statements bulletin 1-12/2017: Uponor continues its solid performance, despite sizable investments for the future
Uponor Corporation Financial statements bulletin 1-12/2017 15 February 2018 8.00 EET
Uponor continues its solid performance, despite sizable investments for the future
- Supported by higher net sales, effectivity enhancements due to the transformation programmes helped to improve comparable operating profit in Building Solutions – Europe and Uponor Infra in 2017; operating profit in Building Solutions – North America remained strong and improved modestly in USD
- Net sales for Oct–Dec 2017 €279.4 (2016: 268.9) million
- Comparable operating profit for Oct–Dec at €18.0 (16.1) million
- Net sales for Jan–Dec: €1,170.4m (1,099.4m), up 6.5% in organic terms; growth in constant currency 7.4%
- Operating profit for Jan–Dec: €95.9m (71.0m); up 35.2%; comparable operating profit at €97.2m (90.7m), up 7.2%
- The effective tax rate was 25.8% (31.3%), largely as a result of the Supreme Administrative Court tax resolution in Uponor’s favour in Finland, as well as the U.S. tax reform
- Earnings per share at €0.83 (0.58)
- Guidance statement for the year 2018: Excluding the impact of currencies, Uponor expects its organic net sales and comparable operating profit to grow from 2017
- The Board’s dividend proposal is €0.49 (0.46) per share, of which 24c is paid in March 2018 and 25c in September 2018
President and CEO Jyri Luomakoski’s comments:
- In 2017, we saw positive progress throughout the Group, with net sales and profitability growing in all segments. Meanwhile, we have continued to execute a challenging but rewarding R&D programme with our investment into forward-looking technology once again rising to historically high figures.
- After a 21-month journey alongside our technology partner Belkin, our joint venture Phyn presented its first product in the U.S. market in January 2018. This unique product, with its specialised professional route to market, represents another major step into the digital smart water technology market.
- Building Solutions – Europe reported a solid improvement in comparable operating profit for the full-year, with net sales modestly rising. While we were able to report positive progress in several countries, including Eastern Europe, Russia and Spain, we lagged behind our aspirations in some key markets such as Germany. Strategically, we are placing the focus on developing new hygienic solutions and prefab technology which will offer compelling value to professional sectors on the market.
- Building Solutions – North America is actively building up its manufacturing capacity. Construction work in Apple Valley has been completed and new personnel have been trained. Also the investment in Hutchinson is progressing well towards completion in the summer of 2018. Both of these impacted our profitability in Q4 and will also impact in the first half of 2018. Overall, the segment’s product supply is running smoothly and we have returned to a committed lead time promise in customer orders.
- Uponor Infra reported a brisk improvement in performance, driven by cyclical improvement in demand in North America. The performance in Europe, where markets for the most part were flat or growing modestly, did not meet acceptable levels in 2017.
The Board’s dividend proposal
The Board proposes to the Annual General Meeting a dividend of €0.49 (0.46) per share, to be paid in two instalments. When making the proposal, the Board considered the solvency of the company, the company’s dividend policy, the business outlook and planned investments, recognising the high availability of external funding for the company’s growth plans.
Key financial figures
|
Consolidated income statement (continuing operations), M€ |
2017 | 2016 | 2015 | 2014 | 2013 | ||
| Net sales | 1,170.4 | 1,099.4 | 1,050.8 | 1,023.9 | 906.0 | ||
| Operating expenses | 1,038.4 | 991.0 | 942.7 | 926.4 | 823.6 | ||
| Depreciation and impairments | 39.2 | 41.6 | 39.1 | 36.5 | 33.0 | ||
| Other operating income | 3.1 | 4.2 | 2.4 | 2.4 | 0.8 | ||
| Operating profit | 95.9 | 71.0 | 71.4 | 63.4 | 50.2 | ||
| Comparable operating profit | 97.2 | 90.7 | 75.8 | 67.7 | 55.2 | ||
| Financial income and expenses | -5.4 | -10.0 | -8.9 | -7.4 | -7.1 | ||
| Profit before taxes | 88.2 | 60.4 | 62.8 | 56.3 | 43.2 | ||
| Result from continuing operations | 65.4 | 41.5 | 37.1 | 36.3 | 27.1 | ||
| Profit for the period | 65.4 | 41.9 | 36.9 | 36.0 | 26.8 | ||
| Earnings per share | 0.83 | 0.58 | 0.51 | 0.50 | 0.38 |
Information on the financial statements bulletin
This release is a condensed version of Uponor’s 2017 financial statements 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 of the previous year. Unless otherwise stated, the figures refer to continuing operations. Any change percentages were calculated from the exact figures and not the rounded figures published here.
Webcast and presentation
A webcast of the results briefing in English will be broadcast on 15 February at 13:00 EET. It can be viewed via our website at investors.uponor.com or via the Uponor IR mobile app. The recorded webcast can be viewed via the website or the Uponor IR mobile app shortly after the live presentation. All presentation materials will be available at investors.uponor.com > News & downloads.
Next interim results
Uponor Corporation will publish its Q1 interim results on 3 May 2018. During the silent period from 1 April to 3 May, Uponor will not comment on market prospects or factors affecting business and performance.
Interim results October – December 2017
Markets
Construction activity in Uponor’s key building markets saw no notable changes from the third quarter and, overall, the markets remained at a healthy level during the fourth quarter. In Europe, builders continued to report strong order books notwithstanding the soft housing permit trends in some areas, such as Sweden and Germany, in the final quarter. In North America, demand continued to be steady in Uponor’s key market segments. Market demand for infrastructure solutions continued to be high in Canada and Sweden.
The abnormal weather and storm patterns experienced in the third quarter did not repeat themselves at the same magnitude towards the end of the year, although lengthy rain fall and harsh winter weather was experienced in some areas, potentially causing some delays in building and construction projects.
Net sales
Uponor reported net sales of €279.4 (268.9) million for the fourth quarter, showing growth of 3.9% in reported numbers from 2016. The currency impact, mainly from the USD, came to €-2.6 million, whereby the year-over-year growth in the quarter in constant currency came to 4.9%.
Building Solutions – Europe’s sales development was flat, with net sales coming to €125.5 (125.8) million, a decline of -0.3% from the comparison period. The main reason for the lacklustre development was a decline in net sales in key Central European and Nordic markets, reflecting e.g. fewer ceiling cooling projects in Germany and weaker development of distribution business in the Nordics. Positive net sales growth was reported in Denmark, Spain and Russia, and also in Asia, which is reported as part of this segment.
Building Solutions – North America continued its healthy growth with net sales picking up especially in Canada. Growth in the U.S. softened from the third quarter, similarly to 2016. Net sales measured in euro came to €79.5 (77.2) million, which represents an increase of 3.0%. In USD, the pace of growth was more marked, with net sales at $94.2 (82.7) million, up by 13.9%. After the temporary production challenge in April, Uponor has increased its manufacturing capacity and was able to return its daily operations to normal lead time schedules.
Uponor Infra’s net sales amounted to €75.4 (67.2) million, showing growth of 12.2%. Net sales growth was driven by strong volume growth, mainly in North America, Sweden and Poland. This offset a drop in net sales in Finland and Norway, where infrastructure projects were fewer in 2017 compared to the previous year.
Breakdown of net sales by segment, October–December:
|
M€ |
10-12 2017 |
10-12 2016 |
Reported change |
| Building Solutions – Europe | 125.5 | 125.8 | -0.3% |
| Building Solutions – North-America | 79.5 | 77.2 | 3.0% |
| (Building Solutions – North-America, M$ | 94.2 | 82.7 | 13.9%) |
| Uponor Infra | 75.4 | 67.2 | 12.2% |
| Eliminations | -1.0 | -1.3 | |
| Total | 279.4 | 268.9 | 3.9% |
Profits and profitability
Uponor’s gross profit in the final quarter of 2017 totalled €95.0 (85.9) million. Comparable gross profit totalled €95.0 (91.4) million. The comparable gross profit margin remained stable at 34.0% (34.0%).
Consolidated operating profit for the fourth quarter came to €18.0 (7.5) million, representing growth of 141.4%. The operating profit margin came to 6.4% (2.8%). In addition to an increase in net sales, growth in operating profit is due to the fact that the fourth quarter of 2016 included costs relating to the European transformation programmes which affected comparability. In 2016, items affecting comparability (IAC) totalled €8.6 million in the fourth quarter, of which €5.6 million was related to Building Solutions – Europe and €3.0 million to Uponor Infra.
Comparable operating profit, i.e. excluding any items affecting comparability, also improved and came to €18.0 (16.1) million, while the comparable operating profit margin came to 6.5% (6.0%).
Building Solutions – Europe’s reported operating profit was €10.2 (1.6) million. Adjusting for IAC, comparable operating profit came to €10.2 (7.2) million, which represents a comparable operating profit margin of 8.1% (5.7%). The performance improvement resulted from cost savings derived from the transformation programme, offsetting the decline in net sales in the fourth quarter.
Building Solutions – North America’s operating profit came to €9.6 (11.9) million, or to $11.5 (12.7) million measured in USD. The operating profit margin weakened to 12.2% (15.4%). The main reasons for this were costs related to establishing a second manufacturing site, higher conversion and overhead costs after the production issue experienced in April, as well as a higher than average share of lower margin products in the sales mix. Further, a more expensive material used for plastic fittings has an adverse impact on operating profit in a year-over-year comparison.
Uponor Infra reported a clear improvement in operating profit, coming to €1.8 (-5.0) million. The comparable operating profit came to €1.8 (€-2.1) million. The positive trend was a result of operational leverage on lively net sales in Canada. The European business suffered from a lack of large projects, high resin prices earlier in the year, and challenges related to production relocations.
Operating loss in the Others segment increased year-over-year, due to accruals made in Uponor Insurance Ltd. to cover potential claim exposures. In 2016, the costs were partially offset by income from electricity hedging and reversal of unused environmental provisions.
Reported operating profit by segment, October–December:
| M€ |
10-12 2017 |
10-12 2016 |
Reported change | |
| Building Solutions – Europe | 10.2 | 1.6 | 546.3% | |
| Building Solutions – North-America | 9.6 | 11.9 | -19.8 % | |
| (Building Solutions – North-America, M$ | 11.5 | 12.7 | -9.9 %) | |
| Uponor Infra | 1.8 | -5.0 | 137.4 % | |
| Others | -2.5 | -0.3 | ||
| Eliminations | -1.1 | -0.7 | ||
| Total | 18.0 | 7.5 | 141.4 % |
Comparable operating profit by segment, October–December:
|
M€ |
10-12 2017 |
10-12 2016 |
Comparable change |
| Building Solutions – Europe | 10.2 | 7.2 | 12.5% |
| Building Solutions – North-America | 9.6 | 11.9 | -19.8 % |
| (Building Solutions – North-America, M$ | 11.5 | 12.7 | -9.9 %) |
| Uponor Infra | 1.8 | -2.0 | 189.7 % |
| Others | -2.5 | -0.3 | |
| Eliminations | -1.1 | -0.7 | |
| Total | 18.0 | 16.1 | 12.5 % |
Financial statements January – December 2017
Markets
Construction activity developed favourably in 2017, supported by strong macroeconomic tailwinds. In North America and Europe, confidence on the part of both consumers and businesses, strong labour markets, and accommodative monetary policies drove growth across most residential and non-residential building segments.
In Central Europe, record-high employment levels and high levels of immigration in Germany fuelled growth in multi-family residential projects, while the significantly larger residential renovation segment was flat. Despite consistently positive measures of business confidence, non-residential construction remained steady, expanding only marginally overall. Builders throughout the industry also reported an increasingly severe lack of skilled labour, which probably hindered growth. In the Netherlands, both the residential and non-residential market grew from 2016.
In Southwest Europe, Spain saw a marked increase in construction activity, albeit from a low base. The significantly larger French market also made notable gains, while the Italian market remained depressed, yet stable. Meanwhile, fallout from the “Brexit” negotiations was muted in the UK, with building activity remaining steady, in general, to the end of the year.
Construction activity in the Nordic countries grew from 2016. In Finland, the number of multi-family projects in urban growth centres increased, while non-residential activity was largely on a par with 2016. In Sweden, the number of multi-family projects remained at elevated levels not seen since the early 1990s, while businesses also initiated non-residential projects in significantly larger numbers than the previous year. In both Denmark and Norway, residential segments generated modest growth, while non-residential markets grew marginally.
In Eastern Europe, the Russian market has stabilised, but remains rather weak. In East-Central European countries such as the Czech Republic, Hungary and Poland, residential investments rose, while non-residential activity was more mixed. Construction spending in the Baltic countries expanded.
In North America, residential and non-residential markets grew at a moderate overall rate. While many employment and confidence measures remained at exceptionally strong levels in the USA, market growth was tempered by a persistent lack of skilled labour and, to a lesser extent, cost inflation. In Canada, construction activity remained at a high level, but moderated in some building segments.
With regard to Uponor’s infrastructure solutions, demand in the Nordic markets was stable on the whole, with demand in Sweden improving notably. The markets in Poland and other East Central European countries remained subdued, with the exception of a few notable EU funded projects, while civil engineering spending rose significantly in the Baltic countries. In Canada, a pickup in business investments impacted positively on demand.
Net sales
Uponor’s 2017 consolidated net sales amounted to €1,170.4 (2016: €1,099.4) million, up 6.5% year-on-year. The currency impact totalled €-10.9 million, bringing the 2017 full-year growth in constant currency to 7.4%. The negative currency effect was mainly due to the USD and SEK, while the RUB had a small positive influence.
Building Solutions – Europe’s net sales amounted to €521.7 (511.0) million, showing growth of 2.1% year-over-year. Growth of net sales was prevalent in most European key markets. Two exceptions included Germany, where the satisfactory development in prefabricated solutions was not enough to cover the lower sales in the ceiling cooling business, where Uponor turned down projects due to low margins, and Finland, where net sales declined due to the fact that the markets grew most in building types and in urban areas which offer less value for Uponor. In addition, the UK business clearly declined, partly due to earlier internal reorganisation measures, and partly as a result of the rising costs of exports into the UK. The markets in Spain, Austria, Russia and Norway showed the most positive trends in terms of net sales.
Building Solutions – North America reported full-year net sales at €328.2 (305.6) million, up 7.4%. In U.S. dollar terms, net sales climbed to $373.2 (337.2) million, representing growth of 10.7%, exactly the same as the growth reported for full-year 2016. Throughout the year, sales of the PEX plumbing offering have developed steadily, aside from the temporary production issue experienced in April. Now that the shortage of plastic fittings resin has been overcome, plastic fittings sales are also recovering to earlier sales patterns. Overall, the building solutions business in North America, with its increasing number of new market entrants, has become more competitive, slowing net sales growth in certain sectors of the market.
Uponor Infra’s net sales for 2017 came to €323.4 (287.9) million, which represents growth of 12.3%. Most of this growth came from North America and Sweden, where the markets were flourishing through most of the year, and from Poland where large projects began towards the end of the year in particular.
Within the business groups, the share of Plumbing Solutions represented 49% (49%), Indoor Climate Solutions 24% (25%), while Infrastructure Solutions represented 27% (26%) of Group net sales.
Measured in terms of reported net sales, and their respective share of Group net sales, the 10 largest countries were as follows (2016 figures in brackets): the USA 26.3% (25.1%), Germany 13.2% (14.7%), Finland 10.3% (11.2%), Sweden 9.7% (9.1%), Canada 8.6% (7.3%), Denmark 4.3% (4.5%), the Netherlands 3.5% (3.6%), Spain 3.2% (3.2%), Norway 2.6% (2.7%), and Russia 2.0% (1.7%).
Net sales by segment for 1 January – 31 December:
| M€ |
1–12 2017 |
1–12 2016 |
Reported change |
| Building Solutions – Europe | 521.7 | 511.0 | 2.1% |
| Building Solutions – North America | 328.2 | 305.6 | 7.4% |
| (Building Solutions – North America (M$) | 373.2 | 337.2 | 10.7%) |
| Uponor Infra | 323.4 | 287.9 | 12.3% |
| Eliminations | -2.9 | -5.1 | |
| Total | 1,170.4 | 1,099.4 | 6.5% |
Results
The consolidated full-year gross profit ended at €394.1 (376.0) million, a change of €18.1 million. The gross profit margin came to 33.7% (34.2%). Comparable gross profit came to €395.1 (383.9) million, or 33.8% (34.9%). Gross profit was burdened by a tight competitive situation and product mix issues in Building Solutions – Europe, despite improvements in production efficiency, as well as an increase in costs and weaker production yield than anticipated in Building Solutions – North America.
Consolidated operating profit came to €95.9 (71.0) million, a clear improvement from the previous year, mainly due to transformation programme costs in 2016. The operating profit margin ended at 8.2% (6.5%) of net sales.
Comparable operating profit, i.e. excluding any items affecting comparability relating to the transformation programmes in Building Solutions – Europe and in Uponor Infra, reached €97.2 (90.7) million, an increase of 7.2%. Comparable operating profit margin came to 8.3% (8.2%). The net total amount of items affecting comparability was €1.3 (19.7) million, of which €2.8 (12.4) million was reported in Building Solutions – Europe and €-1.5 (7.2) million in Uponor Infra.
Building Solutions – Europe reported an improvement in full-year comparable operating profit, which came to €42.8 (37.8) million. This growth was the result of an increase in net sales and the savings achieved by the transformation programme, mainly relating to the enhanced production network. The transformation programme was completed during 2017. The segment’s profitability was also burdened by the continuing tight competitive situation, which affected both the indoor climate and plumbing markets, as well as challenges within the distribution channel.
Building Solutions – North America is briskly expanding its capacity and building up and training the organisation in order to respond to growth in demand and to return capacity utilisation to a long-term sustainable level. For the above reasons, the segment’s operating profit dropped slightly, and came to €49.7 (50.0) million, or $56.5 (55.2) in USD. Managing the repercussions of the temporary production challenge in the spring of 2017 also had an effect on the full year figures.
Uponor Infra reported a brisk improvement in comparable operating profit which reached €10.5 (6.4) million. The main contributor to this was the North American infrastructure solutions business, which experienced a boost in net sales and an improvement in margins.
Other operating income in 2017 includes a gain of €1.9 million from the sale of Uponor Infra’s real estate premises in Vaasa, Finland.
Uponor’s net financial expenses declined to €5.4 (€10.0) million, including a positive impact of €3.6 million from the Finnish Supreme Administrative Court tax resolution. Net currency exchange differences in 2017 totalled €-3.2 (-3.9) million.
The share of the result in associated companies, €-2.3 (-0.6) million, includes product development and other start-up costs related to Phyn, the joint venture company with Belkin International, Inc. established in 2016.
Profit before taxes was €88.2 (60.4) million. The effective tax rate of 25.8% (31.3%) was affected by the Finnish Supreme Administrative Court tax resolution, in Uponor’s favour, which had an impact of -2.6ppts, or €2.3 million, and the U.S. tax reform whose impact was -2.6ppts, or €2.3 million. The change impact of the U.S. tax reform is due to a mandatory repatriation and revaluation of the net deferred taxes with the new, lower federal tax rate. Both the U.S. and Finnish elements affecting the effective tax rate in 2017 are viewed as one-time impacts. Income taxes totalled €22.8 (18.9) million.
Profit for the period totalled €65.4 (41.9) million. Return on equity reached 19.4% (13.1%).
Return on investment increased to 16.3% (14.1%). Return on investment, adjusted for items affecting comparability, came to 16.6% (18.3%).
Earnings per share were €0.83 (0.58). Equity per share was €3.83 (3.60). For other share-specific information, please see the Tables section.
Consolidated cash flow from operations amounted to €101.5 (59.9) million, while cash flow before financing came to €42.0 (-31.9) million. In 2016, cash flow before financing was burdened by the German acquisitions in January 2016 and the $15 million investment in the joint venture company Phyn in July 2016.
Key figures are reported for a five-year period in the key financial figures section.
Operating profit by segment for 1 January – 31 December:
| M€ |
1-12/ 2017 |
1-12/ 2016 |
Reported change | |
| Building Solutions – Europe | 40.0 | 25.4 | 57.3% | |
| Building Solutions – North-America | 49.7 | 50.0 | -0.7% | |
| (Building Solutions – North-America (M$) | 56.5 | 55.2 | 2.3%) | |
| Uponor Infra | 12.0 | -0.8 | 1538.0% | |
| Others | -4.2 | -2.0 | ||
| Eliminations | -1.6 | -1.6 | ||
| Total | 95.9 | 71.0 | 35.2% |
Comparable operating profit by segment for 1 January – 31 December:
|
M€ |
1-12 2017 |
1-12 2016 |
Comparable change |
| Building Solutions – Europe | 42.8 | 37.8 | 12.9% |
| Building Solutions – North-America | 49.7 | 50.0 | -0.7% |
| (Building Solutions – North-America, M$ | 56.5 | 55.2 | 2.3%) |
| Uponor Infra | 10.5 | 6.4 | 65.5% |
| Others | -4.2 | -1.9 | |
| Eliminations | -1.6 | -1.6 | |
| Total | 97.2 | 90.7 | 7.2% |
Investment, research and development, and financing
For the last decade or so, Uponor has focused on maintaining a careful balance between targeting resources at the most viable opportunities and keeping overall investment modest, and this policy continues to be valid. However, in 2016, capital expenditure, including R&D, had already grown from its longer-term historic levels and a similar trend continued in 2017. A significant element of this expenditure was on forward-looking strategic investments, such as the digitalisation efforts announced during the years 2016-2017. These initiatives will help to ensure that we remain at the forefront of development in our industry, and will help us to safeguard the competitiveness of our offering in the digital age.
In addition, two capacity expansion investments were launched in Building Solutions – North America. The first, announced on 4 May 2017, was Uponor, Inc.’s plan to expand its manufacturing facility in Apple Valley, Minnesota with a €16.3 million ($17.4 million) investment. The second investment, was intended to safeguard future pipe manufacturing capacity and meet expected longer-term growth: on 20 July 2017 Uponor announced the purchase of a manufacturing facility and real estate in Hutchinson, Minnesota. The €5.6 million ($6.3 million) deal was closed on 3 August 2017. It is estimated that the total investment in the Hutchinson facility will reach circa $30 million by the end of 2018. Of this sum, $8.6 million had already been used by year end 2017. Uponor, Inc. is a U.S. subsidiary and part of Building Solutions – North America.
In addition to new initiatives, a considerable amount of funds was again used for selected productivity improvements, maintenance and the modernisation of technology in our manufacturing operations, maintaining their competitiveness with regard to both cost-efficiency and quality.
In 2017, gross investment in fixed assets totalled €63.4 (50.7) million. Net investments totalled €61.8 (48.4) million.
Research and development costs, which were at a historically high level, grew to €23.2 (21.4) million, or 2.0% (1.9%) of net sales. Driven by the new and expanded Group Technology and Corporate Development function established in 2016, Uponor channelled further funds into digitalisation and Internet of Things (IoT) initiatives, the development and finalisation of new-generation indoor climate controls and plumbing fittings, as well as pipe material technology and production process improvements.
The main existing long-term funding programme on 31 December 2017 was the 5-year bilateral loan agreement of €100 million, signed in 2017, which will mature in July 2022. Resulting in a modest increase in long-term interest-bearing liabilities, the new loan replaced the earlier €80 million bond maturing in June 2018, which is now booked as current liabilities.
In addition to the above-mentioned funding arrangements, Uponor has outstanding, bilateral long-term loans of €50 million and €20 million, both of which will mature in the summer of 2021. As back-up funding arrangements, Uponor has four committed bilateral revolving credit facilities in force, totalling €200 million. These back-up facilities will mature in 2019-2021; none of them were used during the reporting period.
For short-term funding needs, Uponor’s main source of funding is its domestic commercial paper programme, totalling €150 million, none of which was outstanding on the balance sheet date. Available cash-pools limits granted by Uponor’s key banks amounted to €34.8 million, none of which was in use on the balance sheet date. At the end of the year, Uponor had €107.0 (16.3) million in cash and cash equivalents.
Accounts receivable and credit risks received special attention throughout the year. Most of Uponor’s accounts receivable are secured by credit insurance.
Consolidated net interest-bearing liabilities decreased slightly to €151.5 (159.5) million. The solvency ratio was 40.5% (42.8%) and gearing came to 43.5 (48.8). Average quarterly gearing was 58.4 (56.7), in line with the range of 30–70 set in the company’s financial targets.
Events during the period
In January 2017, Uponor closed its PEX pipe production site in Móstoles, Spain and concentrated production in the company’s facilities in Virsbo, Sweden as part of the transformation programme. Building Solutions - Europe’s transformation programme was completed in June. The last initiative in the programme involved the closing of an office in Italy in December.
In March, at the international ISH trade fair in Germany, Uponor presented its solutions and new offerings under the concept “Build on innovation”, with a focus on drinking water hygiene, indoor climate, comfort and efficient energy distribution for a wide variety of building types. Uponor also presented its renewed Uponor PRO mobile app, which is intended to be the mobile channel through which Uponor serves the professional community.
On 4 May 2017, Uponor’s U.S. subsidiary, Uponor, Inc., part of the Building Solutions – North America segment, announced plans to continue expanding its manufacturing facility in Apple Valley, Minnesota with a €16.3 million ($17.4 million) investment. As the tenth expansion since operations began in Apple Valley in 1990, this project was completed in January 2018, adding 5,440 square metres (58,000 square feet) in manufacturing operations space related to crosslinked polyethylene (PEX) pipe production. Furthermore, on 20 July, Uponor announced a plan to purchase a manufacturing facility and real estate in Hutchinson, Minnesota, intended to safeguard future pipe manufacturing capacity and meet expected longer-term growth. Production of PEX pipe in Hutchinson is expected to begin in the summer of 2018, after regulatory approvals have been obtained.
On 13 September, the Supreme Administrative Court in Finland resolved the taxation adjustment decisions, based on the appeals submitted in January 2016, concerning Uponor Corporation and its subsidiary Uponor Business Solutions Oy. The matter concerns taxation adjustment decisions made by the Large Taxpayers’ Office in 2011. The decision of the Supreme Administrative Court lowers Uponor Corporation’s uncharged mark-up of service fees, which was added to the company’s taxable income, from seven to three per cent for the tax years 2005 – 2007. The taxes, late fees and tax increases imposed on the company have also been decreased. The taxation adjustment decisions concerning the parent company’s subsidiary, Uponor Business Solutions Oy, for the 2005 tax year were also overruled. The Finnish Tax Administration has reassessed the changes in taxation caused by this decision and will adjust the payment for both companies. With regard to the tax years 2006 – 2009, the clarification of arm’s length amounts of service fees charged by Uponor Business Solutions Oy have been returned to the Finnish Tax Administration for review.
Uponor Infra announced two new licensees in 2017. Licenses to manufacture and market the Weholite® pipe were granted to the French company TUBAO S.A.S. and the Tanzanian company, Plasco Ltd. Invented in the 1980s, Uponor’s revolutionary Weholite® technology consists of high density polyethylene (HDPE) pipe, fittings and fabricated assemblies, and is used worldwide in low-pressure service applications for potable water, storm water, sewage and various other liquids.
On 13 December, the Board of Directors of Uponor Corporation resolved to continue the key management Performance Share Plan mechanism, originally decided on by the Board in 2014. Approximately 50 Group key managers, including the members of the Executive Committee, belong to the target group covered by the new plan. The new plan covers the calendar years 2018–2020. The potential reward based on the new plan will be paid in 2021. The purpose of the incentive programmes is to align the objectives of the management and Uponor shareholders in order to increase the value of the company, boost profitable growth and retain the services of participants over the longer term.
Non-financial information
In its Annual report 2017, Uponor provides non-financial information on its performance. This information has been reviewed by the Board of Directors.
Events after the period
Effective 2 January 2018, Uponor Corporation was listed on the Large Cap segment on Nasdaq Helsinki.
In January 2018, Building Solutions – North America presented a new monitoring system for homes, named Phyn Plus Smart Water Assistant + Shutoff. This new monitoring system for homes automatically measures changes in water pressure, in order to identify and alert homeowners of leaks. The product will be available in the USA in the spring. Its introduction to the European markets is planned for 2019.
On 13 February, Uponor announced its decision to invest an additional USD10 million in Phyn, a smart water technology joint venture between Uponor and Belkin International, bringing its total investment in the company to USD25 million. After this investment, Uponor will have a 50 percent ownership in Phyn, both in the U.S. and in Europe, with the other 50 percent owned by Belkin. As a joint-venture company, Phyn will be consolidated into Uponor’s financial accounts using the equity method.
Short-term outlook
Uponor reported favourable market trends for the third quarter in October 2017, and anticipated that the markets would somewhat soften towards the year-end but trends for the second half of 2017 would match those of the first half year. This is more or less what happened.
For the whole 2017, the overall macro-economic development in Uponor’s key markets, Europe and North America, has been rather strong and there are no indicators emerging that would materially change the picture. This view is justified by various supporting arguments, such as rising employment rates, demographic needs, sustainability demands and aspirations, new technologies such as digitalisation and prefabrication, as well as urbanisation, to name a few. All of these can act as stimulants to economic activity and prosperity.
Uponor has strengthened its operations in several respects in recent years. Uponor’s business segments are more streamlined, more efficient and have a competitive supply chain and manufacturing network. Our sales and marketing functions have been reorganised and refocussed to align with customer needs and our strategic ambitions. In North America, we are determinedly building up our capacities and capabilities to meet growing customer demand, which has been a bottle neck to growth in the last few years.
Uponor remains committed and is working hard to be at the forefront of the digitalisation and sustainability trends in our industry, and has already launched new unique offerings, for instance in the niche sector of smart water technology.
Assuming that economic and political developments in Uponor's key geographies otherwise continue undisturbed, Uponor issues the following full-year guidance for 2018:
Excluding the impact of currencies, Uponor expects its organic net sales and comparable operating profit to grow from 2017.
Uponor estimates that the Group's capital expenditure, excluding any investment in shares, will remain at roughly the same level as in 2017, mainly driven by the capacity expansion programme in North America.
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 Annual Report 2017.
Uponor Corporation
Board of Directors
For further information, please contact:
Jyri Luomakoski, President and CEO, tel. +358 20 129 2824
Maija Strandberg, CFO, tel. +358 20 129 2830
Tarmo Anttila
Vice President, Communications, Tel. +358 20 129 2852
Distribution:
Nasdaq Helsinki
Media
www.uponor.com
www.investors.uponor.com
Uponor in brief
The year 2018 marks Uponor's 100-year anniversary. Our success is built on strong partnerships with our customers and stakeholders in the past, present and future.
Uponor is a leading international systems and solutions provider for safe drinking water delivery, energy-efficient radiant heating and cooling and reliable infrastructure. The company serves a variety of building markets including residential, commercial, industrial and civil engineering. Uponor employs about 4,000 employees in 30 countries, mainly in Europe and North America. In 2017, Uponor's net sales totalled nearly €1.2 billion. Uponor is based in Finland and listed on Nasdaq Helsinki. Uponor builds on you - www.uponor.com