Financial statements bulletin 2011: Uponor's net sales grew, profit impacted also by non-recurring items

Uponor Corporation    Financial statements bulleting    10 February 2012 8.00 EET

Financial statements bulletin January - December 2011:  Uponor’s net sales grew, profit impacted also by non-recurring items

  • Net sales growth continued in October-December, but the weakening profitability was further burdened by non-recurring items
  • Net sales 1-12: €806.4 million (2010: €749.2m), change +7.6%; organic growth at 4.9%
  • Operating profit 1-12: €35.4 million (€52.4m), change –32.4%; operating profit without non-recurring items at €45.9 million, change –12.5%
  • Earnings per share at €0.03 (€0.34), earnings per share excluding non-recurring items at €0.32 (€0.34)
  • Guidance: Net sales are expected to grow organically from 2011 and operating profit is expected to exceed €50 million
  • The Board’s dividend proposal is €0.35 (€0.55)  per share

President and CEO Jyri Luomakoski comments on the reporting period:

  • Despite the decrease in economic activity, plastic resin prices moved rapidly up in 2011, impacting negatively our gross profit. Price increases, implemented throughout the year, lagged behind and had a full impact only towards the end of the year. Still, this price inflation had a negative impact of 0.9 percentage points to our 2011 gross profit margin.
  • In January 2012, we signed a deal to divest our non-core German OEM manufacturer Hewing GmbH. We had a long and successful history together, but more recently, the changes in the industrial landscape had weakened its strategic role for us, putting pressure on our consolidated performance. Long-term, I believe both parties will fare better after the agreement reached.
  • I am very disappointed at the large non-recurring items that are included in our Q4 figures, such as the Finnish tax authority decisions and the impairment of the vendor note relating to our 2008 divestment of the UK/Irish municipal infrastructure business.
  • Our cash flow for 2011 remained strong despite weaker profitability. The decision to reduce inventories in the uncertain environment burdened our gross profit in the last quarter through poor capacity utilisation in our operations while the absolute year-on-year reduction in inventories was a good achievement.
  • For 2012, we see a rather stable but geographically inconsistent demand outlook. We expect the raw material price environment to be less volatile than in 2011. Our enhanced cost efficiency in operations and actions initiated to offset inflatory overhead cost pressures give us a good basis to improve our operating profit in 2012.


Non-recurring items in financial statements 2011:

In the fourth quarter of 2011, Uponor’s profit for continuing operations was impacted by the following items which the company considers to be non-recurring items:    

  • €10.5 million impairment write-down related to the divestment of Hewing GmbH, booked in other operating expenses
  • €6.0 million impairment of UK vendor note, booked in financial expenses
  • €3.2 million interest on delayed payments related to the Finnish tax decisions, booked in financial expenses
  • €1.9 million surtaxes related to the Finnish tax decisions, booked in income taxes

During the first three quarters of 2011, no non-recurring items were recorded.


Income statement excluding non-recurring items

M€ 10–12/2011 1–12/2011
Net sales 197.0 806.4
Gross profit 70.0 292.9
- % of net sales 35.5% 36.3%
Operating profit 7.4 45.9
- % of net sales 3.8% 5.7%
Financial expenses, net 4.1 8.5
Profit before taxes 3.3 37.4
Taxes 2.7 13.9
Profit from the continuing operations 0.6 23.5
Earnings per share, €   0.32

(All figures above are excluding non-recurring items.)


The Board’s dividend proposal

The Board’s dividend proposal at €0.35 per share is based on the company’s dividend policy, the cash flow before financing at €0.40 per share, the earnings per share excluding non-recurring items at €0.32, as well as the company’s financial situation and the outlook for 2012.


Information on the financial statements bulletin

This document is a condensed version of Uponor’s 2011 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 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 > Investors. Questions can be sent in advance to The recorded webcast can be viewed at > Investors shortly after publishing. The presentation document will be available at > Investors > News & downloads.

Next interim results

Uponor Corporation will publish its Q1 interim results on 27 April 2012. During the silent period from 1 April to 26 April, Uponor will not comment on market prospects or factors affecting business and performance.



Interim results October – December 2011

Compared to the previous quarter, no great changes occurred in the market situation or trends in the fourth quarter of 2011. In all geographic areas, demand for Uponor’s solutions and services more or less held firm, at a level similar to the third quarter. In the Nordic countries, the mild autumn and the late onset of winter extended the season for infrastructure-related building in particular, but this was offset by concerns about the European and international economies, which began to impact on consumer confidence and export industries.


Net sales

Net sales development in Building Solutions – Europe reached a satisfactory level, while North America continued to post strong figures as in the previous quarter. In Infrastructure Solutions, growth in net sales weakened, despite the mild autumn, mainly due to weakening demand and growing customer uncertainty, reflecting mounting concerns about international economic developments.

Breakdown of net sales, October – December:

M€ 10-12/2011 10-12/2010 Change
Building Solutions – Europe 133.0 123.6 7.6%
Building Solutions – North-America 32.0 26.7 20.0%
(Building Solutions – North-America, M$ 43.2 35.8 20.7%)
Infrastructure Solutions 34.3 33.4 2.7%
Eliminations -2.3 -2.0  
Total 197.0 181.7 8.4%


Profits and profitability

Uponor’s quarterly gross profit margin at 35.5% (37.4%) weakened due to an active reduction of inventories and the resulting unfavourable capacity utilisation in manufacturing. Price increases implemented throughout the year had a full effect in the last quarter, considerably offsetting the decline in gross profit margin due to higher raw material prices.

Operating profit ended up negative at €–3.0 (8.6) million as a result of the €10.5 million impairment related to the divestment of Hewing GmbH, announced in January 2012.

Breakdown of operating profit, October – December:

M€ 10-12/2011 10-12/2010 Change
Building Solutions – Europe 7.8 8.8 -15.4%
Building Solutions – North-America 1.8 1.0 +75.1%
(Building Solutions – North-America, $ 2.4 1.4 +72.9%)
Infrastructure Solutions -1.5 -0.9 +58.5%
Others -11.1 -0.5  
Eliminations 0.0 0.2  
Total -3.0 8.6 -139.9%


Financial statements January – December 2011


Overall macro-economic development in Uponor’s key market areas in 2011 began with reasonable optimism. However, towards the mid-year trends took a more negative direction. Market demand also clearly varied depending on geographical area. In terms of residential and non-residential building markets, the Central European market, driven by lively demand in Germany in particular, maintained its resilience throughout the year. South West European markets, already at very low levels, continued to deteriorate, driven by weakening building activity in Italy, Portugal and Spain, in particular. Somewhere in between these markets were the Nordic countries, in which demand was relatively stable, while declining slightly from the previous year, and North America where builder confidence was at its highest since 2007, although in a flat market. Infrastructure market demand in the Nordic countries and nearby markets continued at a somewhat similar level to the previous year.

The overall market trend of weaker new build activity and a higher share of renovation particularly favoured demand for Business Group Plumbing products, which are ideally suited to such projects. Demand for heating and cooling solutions, i.e. Business Group Indoor Climate, mainly followed new build market trends, with some support from increasing interest in radiant heating and cooling solutions, due to their low energy footprint.


Net sales

Uponor's 2011 net sales from continuing operations amounted to €806.4 (2010: €749.2) million, up 7.6% year on year. All segments managed to increase their sales organically, with Building Solutions – North America posting the strongest relative growth, in local currency.

An organic growth of net sales, i.e. excluding the impact of the Zent-Frenger acquisition, was 4.9 per cent, with equal contributions from sales price increases and volume growth. Fluctuations in foreign currencies decreased 2011 net sales by €1.2 million.

Net sales by segment for 1 January – 31 December 2011:

M€ 1–12
change, %
Building Solutions – Europe 543.9 504.4 7.8%
Building Solutions - North America 121.5 114.6 6.0%
(Building Solutions - North America (M$) 170.1 151.1 12.6%)
Infrastructure Solutions 149.7 138.3 8.1%
Eliminations -8.7 -8.1  
Group (continuing operations) 806.4 749.2 7.6%

The largest 10 countries, in terms of net sales, and their respective share of consolidated net sales, were as follows (figures for 2010 in brackets): Germany 18.7% (16.4%), Finland 11.5% (11.9%), USA 11.0% (11.3%), Sweden 10.5% (10.6%), Spain 4.8% (5.3%), Norway 4.6% (5.0%), Denmark 4.6% (4.7%), the Netherlands 4.4% (4.4%), Italy 4.2% (4.9%) and Canada 4.1% (4.0%).

Net sales for Building Solutions – Europe grew moderately, mainly supported by the healthy German economy which fostered a robust construction market. Development was also positive in some of Germany’s neighbouring countries. The Nordic market situation continued to be relatively stable, driven by the strongly performing Nordic economies. However, these were somewhat affected by concerns about international economic development and its impact on export industries. Despite the tough market in South West Europe, Uponor was able to maintain net sales close to the previous year’s level, improving its market share in Iberia and increasing net sales in other markets, such as France and the UK. In North America, Building Solutions net sales growth mainly originated in the intense focus on commercial opportunities, such as driving installer and builder conversion from competing materials towards Uponor systems. Another positive factor was the successful development of geographical markets, previously marked by low market share. In international markets, Uponor strengthened its position in East Europe, especially Russia, and established a stronger presence in International Sales markets, for instance in the Middle East.

In Infrastructure Solutions, the business has been rather stable overall, but Uponor was able to grow slightly while gaining market share, thanks to recent new product launches, more intensified segmentation of customers, as well as fine-tuning of the supply chain structure.

Within Building Solutions, the Indoor Climate business group developed favourably, driven by increasing customer demand for sustainable, highly energy-efficient systems able to use a variety of energy sources for heating and cooling. Uponor’s efforts were directed at creating a complete system offering and increasing competitiveness, for instance, through new installation and control product launches.

The Plumbing Solutions business group saw particularly strong growth in North America, driven by the unique innovations launched in 2011. These included the new Quick&Easy (ProPEX in North America) expansion tool, which played a key role in converting new customers to using Uponor PEX solutions.

Both of the Building Solutions business groups were able to benefit from the unified marketing campaigns developed for key launches, as well as from continued product harmonisation efforts that are leading to more sales generated by fewer items.



Uponor's consolidated gross profit from continuing operations came to €292.9 (288.1) million, up €4.8 million year on year. The gross profit margin 36.3% decreased by 2.1 percentage points mainly due to changes in product mix. Also the price inflation diluted the gross margin.

Continuing operations generated an operating profit of €35.4 (52.4) million, down 32.4% from the previous year. Also profitability declined, with the profit margin ending up at 4.4% (7.0%) of net sales.

Operating profit was burdened by the January 2012 decision to divest the German company Hewing GmbH, which led to an impairment write-down of €10.5 million impacting on operating profit for continuing operations. Operating profit without this impairment would have stood at €45.9 million and the corresponding operating margin at 5.7%.

Other reasons for the profit decline were the impact of high raw material input costs and overall cost inflation from energy, transportation and similar costs, as well as weakening demand in the second half of the year. Sales and marketing costs increased from the previous year, as a result of the active launch programmes sustained for new products throughout the year. Additionally, sales-related variable marketing costs increased as net sales increased.

In the autumn of 2011, Uponor initiated various cost saving measures to balance weakening market and volume development. The biggest initiatives were related to the closing of the Turkey office, downsizing the operations in Croatia and the dismantling of the Business development unit. Savings were also achieved in organisational streamlining, the added focus on inventory management, including the reduction of product items, and utilisation of communications technology in order to reduce travel for internal meetings.

Despite the challenging market situation, Building Solutions - North America recorded a major improvement in operating profit, mainly due to lively plumbing systems sales, chiefly driven by contractor and installer conversion. In Building Solutions - Europe, operating profit dropped despite higher net sales. In addition to those mentioned earlier, the main reasons for this were high marketing expenses in the early part of the year, followed by weakening market environment in some key markets, such as Southwest Europe also in the latter half of the year. Despite higher net sales, the operating profit of Infrastructure Solutions weakened further, due to raw material price developments, intense price competition, as well as expenses related to new product launches.

The impairment write-down of €10.5 million, related to the divestment of the entire share capital of Hewing GmbH burdens the segment Other’s operating profit. 

Operating profit by segment for 1 January – 31 December 2011:

M€ 1–12
change, %
Building Solutions – Europe 41.7 55.7 -25.0%
Building Solutions – North-America 10.1 3.1 +223.6%
(Building Solutions – North-America (M$) 14.2 4.1 +243.8%)
Infrastructure Solutions -2.4 0.4 -692.2%
Other -14.0 -6.8  
Eliminations 0.0 0.0  
Group (continuing operations) 35.4 52.4 -32.4%

There was a marked increase in financial expenses that came to €17.7 (10.7) million, resulting from interest on delayed payments, totalling €3.2 million, as a result of decisions made by the Finnish tax authority at the end of December 2011, as well as an impairment of €6.0 million related to a UK vendor note, as published in February 2012. Net currency exchange differences were €-1.3 million.

Profit before taxes decreased by 57.8%, to €17.7 (41.7) million. At a tax rate of 88.8% (35.3%), income taxes totalled €15.8 (14.7) million. All three non-recurring items mentioned earlier, i.e. the impairments related to the divestment of Hewing GmbH and to the UK vendor note and the surtaxes and interest related to the Finnish tax decisions are non-deductible expenses for taxation purposes.

Profit for the financial year totalled €1.6 (24.7) million, of which continuing operations accounted for €1.9 (27.0) million.

Return on equity decreased to 0.7% (9.7%) and return on investment to 11.0% (14.4%).

Earnings per share were €0.03 (0.34), and €0.03 (0.37) for continuing operations. Equity per share was €2.86 (3.45). For other share-specific information, please see the tables section.

Consolidated cash flow from operations was €58.4 (49.2) million while cash flow before financing came to €29.3 (35.6) million. Cash flow from operations remained strong despite weaker profitability as a result of successful net working capital management.


Events after the period

On 24 January 2012 Uponor announced the divestment of the entire share capital of Hewing GmbH, the non-core OEM unit based in Ochtrup, Germany. This deal, valued at €11.9 million, led to an impairment write-down of €10.5 million for the financial year 2011, impacting on the operating profit of continuing operations. The deal is effective from 1 January 2012, pending certain closing conditions, such as the approval of the competition authorities. Closure of the deal is expected to take place in March-April 2012.

On 7 February 2012 Uponor announced its decision to impair a vendor note issued in 2008 to the buyer of the municipal infrastructure business that Uponor divested in the UK and Ireland. The vendor note was issued to cover a part of the purchase price. Its total sum including capitalised interests amounted to €6.0 million. Uponor announced on 9 May 2008 that it had divested its UK and Irish municipal infrastructure business to the private equity company 3i and funds managed by 3i. Net sales of the divested business came to €169.1 million in 2007. The enterprise value of the deal amounted to £100 million, giving Uponor a sales gain of nearly €45 million which was included in discontinued businesses.


Near-term outlook

Optimism in the market-place has clearly deteriorated compared to a year ago. While global financial concerns may have alleviated, those related to developments in Europe are still making the headlines on an almost daily basis, and there is no clear direction in the development of the geographic markets. However, Uponor does not expect a major financial crisis to develop in Europe in 2012.

The last few years have been difficult for the building and construction segments of the market. For overall demand, the outlook is steady and Uponor, like many other companies, is prepared for a lengthy period of low activity.

Looking at developments by key geographical area, sentiment in Central Europe has deteriorated since last summer but remains strong relative to previous years and to other European markets. The lively activity levels in Germany and some of its neighbouring countries are expected to cool somewhat in 2012. In the Nordic countries, construction of buildings has remained at a healthy level across the region, while infrastructure investments have been scaled back. In Southern Europe, where governments are continuing to scale back public building projects and unemployment remains high, construction activity continues to be weak. In North America, however, builder sentiment has reached a four-year high, but until now this has failed to translate into a significant increase in building activity.

Uponor’s financial performance may be affected by several strategic, operational, financial, and hazard risks. A detailed risk analysis is provided in the section ‘Key risks associated with business’ above and in the Financial Statements in more detail.

The management is actively continuing its actions to sharpen the company’s focus, cost efficiency and cash flow, while speeding up organic growth in existing and new markets by utilising advantages such as its strong range of new product and system innovations in customer conversion.

With these assumptions, Uponor’s guidance for the year 2012 is as follows:
Uponor's net sales are expected to grow organically from 2011 and operating profit is expected to exceed €50 million. The Group's net investment into fixed-assets is not expected to exceed depreciation.


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


NASDAQ OMX - Helsinki


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. Uponor offers its customers solutions that are sustainable and safe and reliable to own and operate. The Group employs approx. 3,200 persons, in 30 countries. In 2011, Uponor's net sales totalled ca €800 million. Uponor Corporation is listed on NASDAQ OMX Helsinki in Finland.