Q2/2012 Interim report: Uponor grows in North America, faces weakening markets in Europe

Uponor Corporation     Interim report January-June 2012     10 August 2012 8.00 EET

Uponor grows in North America, faces weakening markets in Europe

  • A lively North American market could not compensate for the softening European demand
  • Consolidated net sales showed 2.4% organic growth for the quarter
  • Net sales reported for April–June totalled €218.1 (222.6) million, a change of -2.0%
  • Operating profit for April–June was €16.1 (15.5) million, showing a change of 4.2%
  • Net sales in January–June totalled €410.6 (395.8) million, a change of 3.7%
  • Operating profit for January–June came to €25.4 (18.7) million, a change of 35.9%
  • January–June earnings per share amounted to €0.18 (0.15)
  • January–June return on investment was 15.3% (10.6%), and gearing 74.2 (67.7)
  • January–June cash flow from business operations improved to -€28.2 (-32.4) million
  • The full-year guidance remains unchanged

(This interim report has been compiled in accordance with the IAS 34 reporting standards, and it is unaudited. The figures in the report are for continuing operations unless otherwise stated. ‘Reporting period’ refers to January–June.)


President and CEO Jyri Luomakoski comments on Uponor's performance: 

  • While we are happy to see the positive market trends continue in North America, the outlook in Europe is growing more worrying. Signals indicating further weakening are now spreading to new European markets. 
  • Despite market challenges, we have been successful in utilising business opportunities, thanks to our recent strong product launches and tailwinds from the sustainability trend.
  • We reached a reasonable gross margin, greatly aided by our active sales price management last year and in the first part of this year. The ongoing weakening of the European markets means that we need to look for and implement new measures to adjust costs to operations.
  • While our strategies are based on an extended low-growth market scenario, Uponor continues to implement its growth strategy, based on both organic growth and acquisitions, and is utilising its strong market position to offer competitive and sustainable solutions for its professional partners in key regions of Europe and North America as well as in export markets.

Information on the January – June 2012 interim report bulletin

This document is a condensed version of Uponor’s January-June 2012 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 were calculated from the exact figures and not from the rounded figures published here.

Webcast and presentation material

Upon the release of this report, the presentation material for the interim report will be available at www.uponor.com > Investors > News & downloads.

A webcast on interim results will be broadcast in English on Friday, 10 August 2012, at 10:00 EEST. Connection details are available at www.uponor.com > Investors. Questions for the webcast can be sent in advance to ir@uponor.com. The completed webcast will be available for viewing at www.uponor.com > Investors > News & downloads shortly after the financial information is published.

Uponor Corporation will release its interim report for January–September 2012 on Friday, 26 October 2012. For a silent period from 1 to 26 October, Uponor will not comment on market prospects or factors affecting business and performance, nor will the company engage in discussion of events or trends related to the reporting period or the current fiscal period.




Overall, market development in Uponor’s main geographic regions has been more modest than forecast in 2011, and, in an echo of 2011, market demand declined in the second quarter from that of the first quarter. Clearly, the greatest impact was felt in Europe, Uponor’s core geographic area, where attention was drawn to euro-area financial concerns whose effects kept spreading across the continent. National governments, in southern Europe in particular, were focussing on austerity measures, thus further increasing consumers’ and businesses’ lack of both confidence and willingness to invest. In Uponor’s fields of business, throughout Europe, price competition became ever more apparent as rival companies focussed on utilising any short-term business opportunities available amongst customers, who were increasingly plagued by tighter financing and credit constraints.

In Europe, in comparison to the previous year, a general weakening of demand was felt in building solutions throughout Central Europe, with the sharpest decline experienced in the Netherlands. In Germany, the industry’s sentiments as well as its leading indicators remained resilient, although the mood was affected by the euro crisis. A softening of the market, especially in terms of plans to build new single-family homes, became apparent in the German-speaking countries toward the latter part of the period. Much in line with the trend witnessed for the first time in 2011, demand did not develop in step with the more normal seasonal trend of increasing activity levels as the summer season approaches. In the Nordic countries, the weakening of demand that was noticed already in the first quarter steepened in Sweden, and market activity ended up below the previous year’s figures. Activity in Denmark and Finland was close to 2011 levels. In Norway, the markets continued to show a trend of improvement and the building solutions market turned out to be rather lively. South-west Europe’s markets witnessed a decline from the previous year’s levels, mostly due to the countries’ economic challenges leading to a lack of public funding. Development was weakest in Iberia and Italy. The French and, especially, the UK market showed steadier development of demand, with reasonably high activity levels through much of the second quarter. In Eastern Europe, there was a modest improvement in demand over the levels of the second quarter of 2011 in several individual national markets.

In North America, demand improved slightly from the lively first quarter, especially in the United States, and both the US and Canada showed clear year-on-year improvement in the number of residential housing starts. The market for non-residential projects declined slightly.

Infrastructure solutions demand in the second quarter, in comparison to the previous year, remained rather flat in Finland and Sweden, while a modest pick-up in demand was noted in the Baltic countries as well as in Norway and Denmark. Because of the mild winter experienced in the first quarter in Scandinavia, some of the projects planned for 2012 had already been started in the first quarter, thus slowing the increase of business in the second quarter.

Net sales

Uponor’s growth in net sales for continuing operations in the second quarter slowed in comparison to the robust first quarter of 2012. Net sales came to €218.1 (222.6) million, down 2.0 per cent year on year, reflecting e.g. the divestment of German subsidiary Hewing GmbH. Year-on-year organic growth was 2.4 per cent. Currency translation’s impact in the second quarter had a favourable influence on net sales, supported by higher net sales in non-euro countries, in relative terms. The quarter saw Uponor carry out price increases to compensate for the higher input costs, which helped to offset the weaker volume development, especially toward the latter part of the quarter.

The strong growth experienced in the first quarter continued for Building Solutions – North America. The segment reported year-on-year growth of 16.1 per cent, measured in US dollars. The growth reflects positive development in sales both in the US and in Canada. In Europe, the net sales of Building Solutions – Europe declined clearly as a result of the divestment of Hewing GmbH and the adverse market conditions apparent mainly in southern Europe and some other key markets, particularly the Netherlands and Sweden. Infrastructure Solutions’ net sales remained rather flat.

Net sales by segment (April–June): 

M€ 4–6/2012 4–6/2011 Change
Building Solutions – Europe 133.2 147.8 -9.9%
Building Solutions – North America 38.9 29.5 31.9%
(Building Solutions – North America, USD 49.7 42.8 16.1%)
Infrastructure Solutions 47.6 47.3 0.5%
Eliminations -1.6 -2.0  
Total 218.1 222.6 -2.0%

January–June net sales came to €410.6 (395.8) million, up 3.7 per cent from the comparison period’s level. Organically, net sales growth was 5.0 per cent, calculated with exclusion of Zent‑Frenger GmbH, which was acquired in the second quarter of 2011, for the first quarter of 2012 and Hewing GmbH for both the first and second quarters in 2011 and 2012.

The impact of currency fluctuations on January–June 2012 net sales was a positive
€7.4 million, or 1.8 per cent, year on year. This development was driven primarily by the USD and CAD and to a lesser extent the GBP.

The first half year net sales development shows weakening growth for Building Solutions – Europe when compared to the first quarter, mostly due to the divestment of Hewing GmbH but also confirming the fact that demand suffered in several national markets as euro-crisis concern continued spreading across the continent. In comparable terms, Building Solutions – Europe’s January–June net sales growth was zero. In Building Solutions – North America, net sales remained brisk and year-on-year growth strengthened further, especially in the US. In terms of business groups, sales of plumbing solutions were more lively than sales of indoor climate solutions within the Building Solutions segments.

January–June net sales growth softened also in the Infrastructure Solutions segment from the first quarter. This was partly due to the fact that, especially in the Scandinavian countries, projects had been pulled forward to the first quarter on account of the mild winter.

Net sales by segment (January–June): 

M€ 1–6/2012 1–6/2011 Change
Building Solutions – Europe 266.2 270.1 -1.5%
Building Solutions – North America 69.9 56.2 24.4%
(Building Solutions – North America, USD 91.1 80.0 13.9%)
Infrastructure Solutions 77.3 73.3 5.4%
Eliminations -2.8 -3.8  
Total 410.6 395.8 3.7%


Results and profitability

Operating profit for continuing operations in the second quarter totalled €16.1 (15.5) million, up 4.2 per cent in year-on-year terms. Profitability measured by the operating profit margin improved to 7.4 per cent from the 7.0 per cent reported a year ago.

The gross margin in the second quarter was at a satisfactory level in comparison to last year, supported by the sales price increases implemented in phases since 2011, even though input costs were high. For Building Solutions – Europe, profitability was suppressed by the tight price competition in the subdued markets. Building Solutions – North America’s operating profit improved markedly on account of scale effects generated from higher volumes, rather stable raw-material prices, and continued good efficiency in manufacturing.

Operating profit by segment (April–June): 

M€ 4–6/2012 4–6/2011 Change
Building Solutions – Europe 12.2 13.9 -12.5%
Building Solutions – North America 4.1 2.7 57.0%
(Building Solutions – North America, USD 5.3 3.8 40.7%)
Infrastructure Solutions 2.2 1.7 28.5%
Others -2.6 -2.6  
Eliminations 0.2 -0.2  
Total 16.1 15.5 4.2%

Profit before taxes for April–June totalled €13.9 (13.5) million. The influence of taxes on profits was €5.1 million, while the amount of taxes in the comparison period was €4.5 million. Profit for the second quarter came to €8.8 (9.0) million.

January–June operating profit was €25.4 (18.7) million, up €6.7 million or 35.9 per cent from the comparison period. Profitability, or the operating profit margin, was 6.2 per cent, with the year‑on‑year figure being 4.7 per cent.

Driven materially by translation differences of €2.3 million, expenses remained on a similar level with the first quarter.

Earnings per share for January–June totalled €0.18 (0.15), both basic and diluted. Equity per share was €2.65 (3.00), basic and diluted.

Operating profit by segment (January–June): 

M€ 1–6/2012 1–6/2011 Change
Building Solutions – Europe 23.9 20.5 16.6%
Building Solutions – North America 6.8 3.4 101.9%
(Building Solutions – North America, USD 8.8 4.8 84.7%)
Infrastructure Solutions 0.3 -2.3 113.0%
Others -5.0 -3.7 32.6%
Eliminations -0.6 0.8  
Total 25.4 18.7 35.9%


Investments and financing

Investments during the reporting period were targeted mainly at maintenance and development. Uponor divested its German OEM unit, Hewing GmbH, at the end of the first quarter 2012. The closing sales price was €11.9 million, which was received on 2 April 2012. The divestment improved the periodic cash flow and liquidity.

Gross investments into fixed assets in January–June came to €7.8 (9.2) million. This was clearly below depreciation, which amounted to €14.2 ((14.0) million. The cash flow from business operations improved to -€28.2 million, from -€32.4 million.

Uponor has a special focus on keeping its liquidity at a good level. Because of the escalating risk of bad debt in Europe, in particular, Uponor is active in following up on trade receivables in order to manage risk. Uponor’s available committed bilateral credit facilities amount to €190 million, with none of this amount in use at the end of the reporting period. At end of period, there was €33.5 million in commercial papers issued under the €150 million domestic commercial paper programme.

The Group’s solvency ratio declined to 34.7 per cent (37.4 per cent) as a result of an increase in net working capital. Interest-bearing liabilities amounted to €143.9 (150.9) million. The period-end cash balance totalled €7.7 (36.2) million. Gearing increased to 74.2 (67.7) per cent.


Short-term outlook

Political turbulence in Europe continues, affecting economic development and stability, especially for Europe. Reliably forecasting any lines of development in this environment is impossible. The turbulence is causing financial uncertainty and an unwillingness amongst individuals and organisations to commit to longer-term investment plans, thus slowing demand and affecting any recovery within building and construction markets. In addition to the Southern European countries, which have received the focus thus far, the repercussions are felt across the continent, affecting also the stronger economies.

Developments in the United States and Canada have been more stable, and the markets are expected to remain so for the near term. Despite signs of a slowing economy, the construction industry continues to post gains, though in comparison to a very low base.

As earlier, Uponor is prepared for a lengthy period of current low activity levels, with limited expec­tations of market growth. The main factors supporting business growth are lively renovation activity, longer-term trends of sustainability and low-energy building, and increased preparation for extreme weather conditions, all of which favour Uponor’s indoor climate, plumbing, and infrastructure solutions.

The management are keeping a sharp eye on the company’s focus, cost-efficiency, and cash flow, and further actions to cut overheads and other costs may become necessary in selected markets, if the outlook stays weak. At the same time, Uponor maintains support for its various growth initiatives, to benefit from its strong range of new product and system innovation and utilise the tailwind its sustainable product portfolio enjoys in the markets.

Uponor reiterates its guidance for 2012, announced on 10 February 2012:
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 in fixed assets is not expected to exceed depreciation.

Uponor’s financial performance may be affected by a range of strategic, operational, financial, and hazard risks. A more detailed risk analysis is provided in the ‘Key risks associated with business’ section of the Financial Statements 2011.



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





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. 3,100 persons, in 30 countries. In 2011, Uponor's net sales totalled ca €800 million. Uponor Corporation is listed on NASDAQ OMX Helsinki in Finland. www.uponor.com