Q3/2012 Interim report: Growth in North America supported Uponor’s profit development

Uponor Corporation     Interim report January-September 2012     26 October 2012 8.00 EET

Growth in North America supported Uponor’s profit development 

  • Lively demand in North America continued, Europe saw a further decline
  • Group organic growth for the quarter at 3.3%, slightly better than in April-June
  • July-September net sales totalled €211.3 (213.6) million, a change of  -1.1%
  • July-September operating profit was €22.1 (19.7) million, an improvement of 11.9%
  • January–September net sales totalled €621.9 (609.4) million, a change of 2.1%
  • January–September operating profit was €47.5 (38.4) million, up 23.6%
  • January–September earnings per share amounted to €0.35 (0.32)
  • January–September return on investment was 18.1% (15.3%), and gearing 57.9 (53.7)
  • January–September cash flow from business operations improved to €2.1 (-4.9) million despite the disputed extra tax payment during Q1 2012 in  Finland
  • The full-year guidance remains unchanged

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


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

  • I am happy to report a solid performance development, despite demand for building and construction remaining weak and, in part, still slowing in Europe, our key geographic market. Cost containment and efforts to proactively adjust operations are bearing fruit, while we are able to satisfy customer requests in areas where demand is recovering.
  • In September we announced a joint venture plan concerning our Infrastructure business. This is the biggest M&A transaction in Uponor’s history and the sector’s largest ever in the Nordic countries. We have worked hard and long to achieve this deal, particularly in the third quarter, and look forward to developing the business further, pending official approvals.
  • Despite poor visibility into future market developments, we are building platforms for growth step-by-step, by focussing on key business opportunities, pushing value-adding products and systems onto the market, and working hard to win share in markets in which we want to grow our presence.

Information on the January – September 2012 interim report bulletin

This document is a condensed version of Uponor’s January-September 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 at 10:00 EEST on Friday, 26 October 2012. 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 financial results for 2012 on Tuesday, 12 February 2013. During the silent period from 1 January to 11 February 2013, Uponor will not comment on market prospects or factors affecting business and performance, nor will the company engage in the discussion of events or trends related to the reporting period or the current fiscal period.




The market trends prevalent in Uponor’s key national markets in the second quarter of 2012 have mainly continued. In the European markets, which have been and are being influenced by the prolonged political and financial crisis, demand has mostly continued at its existing, weak levels, but has deteriorated a little further in some markets, particularly in southwest Europe. A marked downward shift in the second quarter was also noticed in Denmark and to a lesser extent in the UK. Demand in Finland and Sweden remained soft, as in the second quarter, whereas in Norway the building and construction markets remained lively. The German economy, which showed signs of weakening sentiment in the second quarter, has continued in the same manner in the third quarter. However, the country’s building markets maintained satisfactory activity levels in the third quarter, much helped by consumer confidence in the value of investments in home building or refurbishments. In Eastern Europe too, earlier trends continued, with Russian demand still vigorous.

In North America, in spite of signs of a slowing economy, the U.S. residential construction industry remained lively, although the commercial market was still fairly flat. In Canada, the vigorous growth of the first half began to ebb in the third quarter.

Development of infrastructure-related demand in Northern Europe ranged from moderate growth to modest decline, depending on the country. Market growth was recorded in Norway and the Baltic countries, while the rest of Scandinavia and the Finnish market remained subdued, being heavily influenced by the slowdown in the residential markets.


Net sales

A negative trend in the reported net sales continued in the third quarter, versus the year before, reflecting the gradually weakening market conditions compared to the robust start to the year. July-September net sales totalled €211.3 (213.6) million, down by 1.1 per cent year on year. Organically, net sales growth was 3.3 per cent, calculated with the exclusion of Hewing GmbH, divested in the first quarter of 2012.

Building Solutions – Europe reported negative growth of net sales at -7.7%, mainly due to weak building market demand in several large European markets, including the impact of the divestment of Hewing GmbH in the first quarter of 2012. In comparable terms, the segment’s growth remained 1.4% in the negative. Sales development of plumbing products was stronger than that of indoor climate products, partly due to a steeper fall in new build versus renovation. The new marketing concepts for the renovation market supported this segment’s sales in Finland, in particular.

Building Solutions – North America continued its solid growth, supported by the lively residential building markets in the U.S. and, to some extent, in Canada.

Infrastructure Solutions’ net sales declined after the livelier first half of the year, mainly due to declining construction markets and austerity measures taken by national governments, which are curbing infrastructure-related investments.

Net sales by segment (July–September):

M€ 7–9/2012 7–9/2011 Change
Building Solutions – Europe 129.9 140.9 -7.7%
Building Solutions – North America 43.1 33.2 29.5%
(Building Solutions – North America, $ 54.5 46.8 16.4%)
Infrastructure Solutions 40.3 42.1 -4.2%
Eliminations -2.0 -2.6  
Total 211.3 213.6 -1.1%

Uponor’s January – September, net sales reached €621.9 (609.4) million, an increase of 2.1%. The impact of currency fluctuations was a positive €15.4 million, or 2.5 per cent, year on year. This development was driven primarily by the USD, with all the other main currencies, i.e. SEK, CAD, GBP and NOK, also having a positive impact. Organically, net sales growth was 4.4 per cent, calculated with the exclusion of Zent‑Frenger GmbH, acquired in the second quarter of 2011, for the first quarter of 2012 and the divested Hewing GmbH for both years, as in the January – June interim report.

Net sales by segment (January–September):

M€ 1–9/2012 1–9/2011 Change
Building Solutions – Europe 396.1 411.0 -3.6%
Building Solutions – North America 113.0 89.4 26.3%
(Building Solutions – North America, $ 145.6 126.9 14.8%)
Infrastructure Solutions 117.6 115.4 1.9%
Eliminations -4.8 -6.4  
Total 621.9 609.4 2.1%


Results and profitability

The gross margin in the third quarter improved from the previous year, supported by the sales price increases implemented throughout the year.

Uponor’s operating profit in the third quarter totalled €22.1 (19.7) million, up by 11.9 per cent in year-on-year terms. Profitability measured by the operating profit margin improved to 10.4 per cent, from the 9.2 per cent reported a year ago. This positive performance development was mainly driven by the better gross margin. Active management of spending and overhead costs was continued, but their development at Group level was adverse due to increased costs in M&A activity and higher overheads, mainly in North America, in support of business growth.

The competitive environment in Europe remained tough, putting pressure on margins both in Building Solutions – Europe and in Infrastructure Solutions. This was due to an increased number of competitors pushing their offerings at a low price in subdued markets.

In addition to the above mentioned factors, the favourable performance development in Infrastructure Solution was influenced by a better product mix in sales. Despite higher overheads, Building Solutions – North America’s operating profit improved markedly on account of higher volumes, reasonable margin development and effective management of manufacturing efficiency.

Operating profit by segment (July–September): 

M€ 7–9/2012 7–9/2011 Change
Building Solutions – Europe 13.9 13.4 3.6%
Building Solutions – North America 7.5 4.9 51.9%
(Building Solutions – North America, $ 9.6 7.0 37.1%)
Infrastructure Solutions 2.3 1.4 75.6%
Others -1.4 0.1  
Eliminations -0.2 -0.1  
Total 22.1 19.7 11.9%

Profit before taxes for July–September totalled €19.5 (18.4) million. The effect of taxes on profits was €7.1 million, while the amount of taxes in the comparison period was €6.1 million. Profit for the third quarter came to €12.4 (12.3) million.

January–September operating profit was €47.5 (38.4) million, up 23.6 per cent from the comparison period. Profitability, or the operating profit margin, was 7.6 per cent, with the year-on-year figure being 6.3 per cent. The translation impact of exchange rates on January – September operating profit was €1.5m positive.

Operating profit by segment (January–September): 

M€ 1–9/2012 1–9/2011 Change
Building Solutions – Europe 37.8 33.9 11.5%
Building Solutions – North America 14.3 8.3 72.2%
(Building Solutions – North America, $ 18.4 11.8 56.5%)
Infrastructure Solutions 2.6 -0.9 391.3%
Others -6.4 -3.6 76.9%
Eliminations -0.8 0.7  
Total 47.5 38.4 23.6%

Earnings per share for January–September totalled €0.35 (0.32), both basic and diluted. Equity per share was €2.78 (3.18), basic and diluted.


Investments and financing

In North America, Uponor launched manufacturing expansion investment on its current premises, in order to meet growth in demand. The programme will be executed by the year end. Other than this, investments during the reporting period were mainly targeted 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.

Gross investments in fixed assets in January–September reached €12.3 million, almost at the previous year’s level of 12.8 million. However, this was clearly below depreciation, which amounted to €21.2 (20.8) million.

Cash flow from business operations in January–September came to €2.1 million, from -€4.9 million, despite the payment in the first quarter of €15.0 million in taxes, surtaxes and interest, with respect to the taxation decisions by the Finnish tax authorities at the end of 2011. Uponor has filed an appeal against the decisions and a request for rectification to the Board of Adjustment.

In order to mitigate risks related to the difficult business environment, Uponor places a special focus on reducing credit risk related to trade receivables. Further, Uponor aims to keep its own liquidity at a high level, while minimising refinancing risks. The company’s available committed bilateral credit facilities amount to €190 million. None of this amount was in use at the end of the reporting period. At end of period, €15.5 million in commercial papers had been issued under the €150 million domestic commercial paper programme.

The Group’s solvency ratio declined to 37.8 (41.9) per cent. Interest-bearing liabilities amounted to €117.7 (126.8) million. The period-end cash balance totalled €8.7 (9.9) million. Gearing increased to 57.9 (53.7) per cent.


Key events

On 21 September, Uponor Corporation and KWH Group Ltd, also of Finland, announced a plan which involves the merger of both companies’ infrastructure pipe businesses into a new joint venture company. The new company, to be named Uponor Infra Oy and jointly owned by Uponor (55.3%) and KWH Group (44.7%), will focus on providing infrastructure pipe systems in northern Europe and elsewhere. The deal is subject to certain closing conditions, including approval by the Competition Authorities. Further to this deal, Uponor will acquire the PEX pipe related production and business of KWH Pipe as a business transfer. Uponor Group’s net debt is expected to increase by approximately €35 million upon the completion of the transaction. This deal should have no material impact on Uponor's gearing or solvency ratio. The management expects to achieve significant cost synergies in relation to the value of the businesses, but this is subject to detailed planning and execution by the management of the joint venture. Uponor anticipates a decision by the authorities within four months of the deal’s announcement.

A new distribution centre building that will serve Uponor’s building solutions business in the Nordic countries has been erected in Västerås, Sweden. Preparations are ongoing to begin operations there in January 2013.

Uponor has continued to develop its project organisation. In Central Europe, the Zent-Frenger business concept is now established in the Swiss market and the first steps have been taken in Austria.

The promotion of new products and systems introduced earlier have been continued and extended to new countries. The pan-European customer loyalty programme, whose development started last year, has now been introduced in five European markets.

Earlier in the year, Uponor reported that, on 12 March, it had acquired the remaining 49.7% of shares in the German company Zent-Frenger Gesellschaft für Gebäudetechnik mbH, and now holds 100% of its share capital. On 17 February, with reference to the December 2011 taxation decisions by the Finnish tax authorities, Uponor notified that it had filed an appeal against the decisions and a request for rectification to the Board of Adjustment. At the end of the first quarter, Uponor closed the divestment of its German OEM unit, Hewing GmbH, as first announced in January 2012.


Human resources and administration

For the January-September period, the number of Group employees (full time-equivalent) in continuing operations averaged 3,112 (3,300), showing a decrease of 188 employees from the equivalent period in 2011. At the end of the period, the Group had 3,043 (3,292) employees, a decrease of 249 from the end of the comparison period. In North America, Uponor has added personnel to service higher demand, while in Europe the opposite development has occurred. Furthermore, the divestment of Hewing, closed at the end of the first quarter, reduced the headcount by 211.

Uponor has started initiatives in Building Solutions – Europe and Infrastructure Solutions, in order to further adjust operations to the weak business climate. These initiatives are expected to lead to modest headcount reductions on different organisation levels Europe-wide, as well as to various other savings in personnel costs.


Share capital and shares

Uponor Corporation’s share capital amounts to €146,446,888, and the number of shares totals 73,206,944. There were no changes in the share capital or shares during the reporting period.

The number of Uponor shares traded on the NASDAQ OMX Exchange in Helsinki in the third quarter was 4.5 (12.8) million, with the value of trading totalling €36.4 (98.3) million. The market value of the share capital at the end of the period was €0.6 (0.5) billion and the number of shareholders was 18,370 (20,445).

In September, The Capital Group Companies, Inc. notified of a change in the reporting of their ownership in Uponor. In the future, holdings under management will be reported in aggregate by The Capital Group Companies Inc., the group’s parent company. According to the notification, the total holding and voting power of The Capital Group Companies Inc. in Uponor Corporation amounted to 8.8508% on 3 September 2012.

At period end, Uponor held 140,378 of its own shares, acquired in the final quarter of 2008 for use in the company’s share-based incentive programmes. In April 2012, Uponor transferred 19,622 of its own shares to the company’s management under the long-term incentive scheme for 2007–2011, as authorised by the Annual General Meeting of March 2012.

The AGM held on 15 March 2012 authorised the Board to resolve to buy back, at a maximum, 3.5 million of the company’s own shares, equating to 4.8 per cent of the total number of shares of the company. These shares may be bought back from unrestricted equity, by means of distributable earnings. The authorisation is valid until the end of the next Annual General Meeting and for no longer than 18 months. The AGM also authorised the Board to resolve to issue a maximum of 7.2 million new shares or to transfer the company’s own shares. The maximum number of shares to be issued is 9.8 per cent of the total number of shares in the company. The Board of Directors is authorised to set the conditions for the share issue by a resolution. Such an authorisation would be valid for three years. The general meeting further resolved to establish a permanent Nomination Board comprising shareholders, or representatives thereof, to prepare proposals each year for the election and remuneration of members of the Board of Directors. In the view of the Board of Directors, it is in the interests of the company and its shareholders that the biggest shareholders in the company participate in preparations for the election and remuneration of Board members. The Board of Directors did not exercise any of the above-mentioned authorisations during the reporting period. The Board of Directors has no other valid authorisations from the AGM.

On the basis of a decision by the AGM, the company distributed dividends of €0.35 per share for the 2011 financial year, in March 2012.


Events after the reporting period

There have been no significant events to report since the reporting period.


Short-term outlook

The European Union remains affected by a complex and inefficient web of political and financial arrangements, with no rapid solutions in sight to the continent’s prolonged economic problems. Reliably forecasting any lines of development in this environment remains challenging.

The need to start new residential building projects is being curbed by tight financing opportunities, as well as unwillingness amongst individuals and organisations to commit to longer-term investment plans. Austerity measures being taken by national governments continue, slowing demand and affecting the prospects of a recovery in the building, construction and civil engineering markets.

Development in the United States has been positive. Although the Canadian market seems to be softening, these markets are expected to remain reasonably strong in the near term. Despite signs of a slowing economy, the North American construction industry continues to post moderate gains.

Uponor remains prepared for a lengthy period at current low activity levels, with limited expectations of market growth. The main factors supporting stable business growth are lively renovation activity, longer-term trends in sustainability and low-energy building, and increased preparation for extreme weather conditions, all of which favour Uponor’s indoor climate, plumbing and infrastructure solutions. In terms of the company’s operative structure, organisational setup and the products and services it offers, Uponor is well positioned to take advantage of current growth opportunities, or to scale up operations should the need arise.

The management is keeping a sharp eye on the company’s focus, cost-efficiency, and cash flow, in order to secure a solid financial position in the longer term. Further action to cut overheads and other costs may become necessary in selected markets, if the outlook remains weak. At the same time, Uponor is maintaining support for its various growth initiatives, in order to benefit from its strong range of new product and system innovation, while utilising the tailwind that 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. http://www.uponor.com.