Interim report January - March 2018: Strong net sales of North American businesses drive performance improvement in the first quarter


Uponor Corporation     Interim report 1-3/2018    3 May 2018     14:00 EET

Interim report January - March 2018: Strong net sales of North American businesses drive performance improvement in the first quarter

  • Strong growth in net sales in North America, especially in infrastructure solutions, boosted Uponor Group’s performance. The development of European businesses was flat in an environment of low demand growth
  • Net sales in January – March totalled €276.9 (2017: 265.1) million, with organic growth at 4.5%, or 10.7%, excluding the adverse currency impact
  • The operating profit came to €17.0 (14.6) million, a change of 16.1%, the currency-neutral improvement being 24.9%
  • Comparable operating profit came to €17.0 (15.0) million, a change of 13.0%
  • Earnings per share were €0.11 (0.11)
  • Return on investment was 9.9% (9.9%), and gearing 66.3% (74.5%)
  • Cash flow from business operations came to €-25.0 (-23.0) million
  • Uponor repeats its full-year guidance announced on 15 February 2018: excluding the impact of currencies, Uponor expects its organic net sales and comparable operating profit to grow from 2017

President and CEO Jyri Luomakoski comments on developments during the reporting period:

  • The first quarter of 2018 was rather uneventful overall. In contrast to 2017, the Easter started in the first quarter resulting in fewer shipping days, which impacted net sales, similar to the prolonged winter that turned out to be somewhat unfriendly to construction in most of our key markets.
  • Generating growth in our Building Solutions - Europe segment continues to be a challenge. While the markets are in good shape, they are not growing in step with the prevailing positive sentiment. Our prefab initiatives continue to progress in line with expectations, as our solutions are genuinely helping customers to improve technical quality and offset labour shortages.
  • Building Solutions - North America had a positive start for the year, recovering well from the supply bottlenecks witnessed last year as a consequence of a production outage in Q2/2017. Nevertheless, due to currency conversion, the consolidated numbers, reported in euro, do not show the positive progress made. Currency swings have not materially impacted on our competitiveness in North America, because operations there are local.
  • We are delighted by Uponor Infra’s overall growth. In 2016 - 2017, the segment carried out and invested in a transformation programme to streamline its Nordic operations. In the current quarter, however, the segment’s growth came mostly from outside the Nordic markets, and hence the benefits of the Nordic transformation programme were not visible.


Key financial figures

Consolidated income statement
(continuing operations), M€
  1-3 20181-3 20172017201620152014
Net sales 276.9265.11,170.41,099.41,050.81,023.9
Operating expenses 250.5241.51,038.4991.0942.7926.4
Depreciation and impairments 9.59.339.241.639.136.5
Other operating income
Operating profit 17.014.695.971.071.463.4
Comparable operating profit
Financial income and expenses -1.7-2.8-5.4-10.0-8.9-7.4
Profit before taxes 13.211.388.260.462.856.3
Result from continuing operations 9.27.465.441.537.136.3
Profit for the period 9.27.465.441.936.936.0
Earnings per share

Uponor Corporation's long-term financial targets
(issued on 12 February 2013)

 Annual targets and actualsLast
12 mths
Organic net sales growth to exceed GDP growth(1 by 3 ppts (2018E: 5.6%)
Comparable(2 EBIT margin >10%
Return on investment, ROI (p.a.) >20%14.8(316.314.115.514.212.5
Gearing (annual average for the four latest quarters) 30 – 7056.458.456.740.445.857.9
Dividend payout > 50% of earnings-59.079.386.384.0100.0

(1)GDP growth based on weighted average growth in the top 10 countries, measured by net sales. 2) The targets issued in February 2013 referred to reported EBIT margin. 3) Average of four quarters.)


Information on the January – March interim report bulletin
This document is a condensed version of Uponor’s January – March 2018 interim report bulletin, which is attached to this release. It is also available on the company website. This interim report has been compiled in accordance with the IAS 34 reporting standards and is unaudited. The figures in brackets are the reference figures for the equivalent period in the previous year. Any change percentages are 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 3 May at 16:30 EET. It can be viewed via our website or via the Uponor IR mobile app. The recorded webcast can be viewed via the website or the app shortly after the live presentation. All presentation materials will be available at > News & downloads.

Next interim results
Uponor Corporation will publish its half year financial report on 25 July 2018. During the silent period from 25 June to 25 July, Uponor will not comment on market prospects or factors affecting business and performance.



Construction activity in Uponor’s key markets continued to benefit from tailwinds in the global economy, with consumers and businesses both driving growth. While construction spending in most markets made gains compared to the same period last year, builders on both sides of the Atlantic continue to report increasingly severe shortages of skilled labour that probably inhibited more vibrant growth. The prolonged winter also slowed building projects in both Europe and North America.

In Uponor’s largest Central European market, Germany, residential permit levels have retreated from their 2016 highs, but new multi-family housing construction continued to increase compared to last year. Although builder confidence remained near its all-time-highs, order books grew, and new construction volumes continued their upward trend, there was no indication of improvement in activity levels in the significantly larger renovation segment. Construction activity in the Netherlands remained solid.

The markets in Southern Europe continued to show signs of improvement on the whole, but developments were uneven. The brisk increase in construction activity witnessed during previous quarters in Spain and France was sustained, while the markets in Italy and the UK were probably hampered by economic and political uncertainty.

In the Nordic region, building activity continued at a healthy pace across most segments. Builder confidence fell back slightly from last summer’s multi-year highs, but remained clearly positive. However, labour shortages across the region continued to create challenges for builders, which is likely to delay or prolong some projects. In Sweden, the growth in residential projects has slowed, while in Finland demand for small flats in urban centres has spurred more projects.

The construction markets in North America remained largely healthy. In Uponor’s largest market, the USA, construction activity rose again in the residential market while growth in the non-residential segments showed signs of slowing. Homebuilder sentiment remained strong, but retreated slightly from the 18-year high in December. Labour shortages and increasing material costs continue to hamper growth, posing a major challenge for builders. Some signs of softening could be seen in the Canadian residential segment.

With regard to Uponor’s infrastructure solutions, the first quarter is typically a slower season. Civil engineering expenditure in the Nordic countries remained modest and influenced by the cold weather, with the exception of Sweden, where the market continued to grow despite this. In Poland, there was a brisk upturn of the market supported by EU-funded demand. In Canada, the significant fall in industrial investments witnessed during 2015-2016 has bottomed out. 


Net sales

Uponor’s consolidated net sales reached €276.9 (265.1) million, up 4.5%. In comparable currency terms, net sales growth was 10.7%. The large negative currency impact of €-16.5 million on net sales was mainly caused by the USD, CAD, and SEK.

Growth of net sales, in local currency, continued to be strong in Building Solutions – North America, driven by sustained healthy market demand, which Uponor was able to benefit from thanks to increased manufacturing output. In euro terms, the strongest growth was reported by Uponor Infra, thanks to very lively sales in North America, but also in Sweden, in contrast to the generally unsatisfactory net sales development in most of Europe. Reported net sales of Building Solutions – Europe grew slightly, despite slower project activity due to cold weather, especially in March, and the bottleneck caused by persistent lack of planning and installation capacity in much of Europe.

Breakdown of net sales by segment (January – March):


Building Solutions – Europe125.2124.30.8%
Building Solutions – North America77.678.2-0.7%
(Building Solutions – North America (M$)95.783.514.6%)
Uponor Infra75.363.119.3%


Results and profitability

Uponor’s consolidated gross profit came to €93.2 (91.4) million, a change of €1.8 million. The gross profit margin was 33.7% (34.5%). Comparable gross profit, i.e. excluding items affecting comparability (IAC), came to €93.2 (91.6) million, with the comparable gross profit margin declining slightly to 33.7% (34.6%). Offsetting the favourable trend in Uponor Infra, the main negative factor was the weakening of gross profit margin in Building Solutions – North America, mainly due to increased costs in the supply chain and the ramp up costs related to the second manufacturing unit.

Operating profit in the first quarter of 2018 came to €17.0 (14.6) million, a change of 16.1% year-over-year. Profitability, as measured by the operating profit margin, came to 6.1% (5.5%). Comparable operating profit came to €17.0 (15.0) million, up 13.0%, with comparable operating profit margin reaching 6.1% (5.7%). The main business driver of the favourable development in operating profit was operational leverage resulting from higher net sales in Uponor Infra and Building Solutions – North America. There was a negative impact on consolidated operating profit due to initiatives taken to secure future competitiveness, including manufacturing expansion in the U.S. and the continued high level of R&D and technology investment. In early 2018, there were no items affecting comparability related to the transformation programmes, as the programmes were brought to completion in 2017. In the first quarter of 2017, a total of €0.4 million in IAC was recorded in Building Solutions – Europe.

Building Solutions – Europe’s operating profit was negatively affected by the ongoing entry into the Asian markets, which is reported through this segment, as well as by weak net sales, partly weather-driven, in some of the segment’s largest European markets, offsetting the savings from the transformation programme completed in 2017. In Building Solutions – North America, profits were diminished by costs related to manufacturing expansion projects, higher freight costs and the upward trend in material costs. Uponor Infra’s strong progress was driven by operational leverage from booming sales in North America, while development in Europe remained unsatisfactory.

Operating profit by segment (January – March):



Building Solutions – Europe6.06.3-4.2%
Building Solutions – North America10.210.6-4.5%
(Building Solutions – North America (M$)12.511.410.2%)
Uponor Infra3.3-1.9271.7%

Comparable operating profit by segment (January – March):



Building Solutions – Europe6.06.7-10.3%
Building Solutions – North America10.210.6-4.5%
(Building Solutions – North America (M$)12.511.410.2%)
Uponor Infra3.3-1.9269.5%

At €1.7 (2.8) million, financial expenses were €1.1 million lower than in the comparison period.

At €-2.1 million, the share of the result in associated companies is related to the minority share in the joint venture company Phyn, in which Uponor increased its ownership from 37.5% to 50.0% in February 2018. The company introduced its first products in the U.S. market in January 2018, sales of which will begin in the second quarter of 2018.

Profit before taxes for January – March totalled €13.2 (11.3) million. The effect of taxes on profits was €4.0 million, compared to €3.9 million in the first quarter of 2017. The estimated tax rate for the full year 2018 is 29.9%, compared to 25.8% in 2017, which included the one-time impact of the Supreme Administrative Court tax resolution in Uponor’s favour in Finland and the one time impact of the U.S. tax reform.

The profit for the first quarter of 2018 amounted to €9.2 (7.4) million.


Investment and financing

Uponor’s gross investments in fixed assets in the first quarter came to €9.9 (7.8) million. Depreciation came to €9.5 (9.3) million. Investments in the first quarter were mainly related to building up new manufacturing capacity in the U.S. as well as increasing the capacity of seamless aluminium composite pipe and pre-fabricated solutions in Europe, each addressing growth in demand. In addition, funds were channelled into new product and technology development. Uponor invested a further USD 10 million (€8.1 million) in Phyn in February 2018, which brings Uponor’s total investment to USD25 million. Uponor now has 50.0 percent ownership of the smart water technology company, with the other half being owned by Belkin International, Inc.

Cash flow from business operations came to €-25.0 (-23.0) million, largely from higher inventories aimed at reducing the number of back orders in Building Solutions – North America in particular. Cash flow from financing and thus cash flow for the period in the first quarter 2018 included the first of two instalments of the dividend payment, €0.24 per share, totalling €17.6 million. The second of the two instalments, €0.25, will be paid in the third quarter. The total dividend payment for 2018 will amount to €35.8 (€33.6) million.

Uponor has successfully managed to maintain a high level of liquidity. The company continues its cautious policy with regard to credit risk, for instance by actively following up on accounts receivable, most of which are secured by credit insurance. Due to volatility in the commodity markets in recent years, Uponor is maintaining a sharp focus on group-wide business continuity management and risk management within the supply chain, in particular, in order to secure the availability and supply of Uponor’s critical raw materials.

The main existing long-term funding programme on 31 March 2018 was the 5-year bilateral loan agreement of €100 million, signed in 2017, which will mature in July 2022. The new loan replaced the earlier €80 million bond maturing in June 2018, 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 at the period end. Available cash-pool limits granted by Uponor’s key banks amounted to €34.8 million, none of which were in use. At the end of the period, Uponor had €46.9 (18.0) million in cash and cash equivalents.

At 37.6% (37.2%), the Group’s solvency has remained at a good level. Net interest-bearing liabilities were €211.9 (224.0) million. Gearing came to 66.3% (74.5%), with the four-quarter rolling gearing being 56.4% (59.6%).


Key events

The year 2018 marks Uponor’s 100-year anniversary, which will be publicised at all major Uponor events throughout 2018.

In January 2018, in the tenth expansion since operations began in Apple Valley, Minnesota in 1990, Uponor, Inc., which is part of Building Solutions – North America, completed its €16.3 million ($17.4 million) manufacturing expansion, adding 5,440 square metres (58,000 square feet) in manufacturing operations space for crosslinked polyethylene (PEX) pipe production. Furthermore, the company’s expansion and opening of a second factory in Hutchinson, Minnesota, which was announced on 20 July 2017, is progressing according to plan. Production there is expected to begin in the summer of 2018.

Also in January, Phyn, Uponor’s joint venture with Belkin International, Inc., launched its first product, the Phyn Plus smart water monitoring and shut-off device, at the International Builders’ Show (IBS) in Florida and the Consumer Electronics Show (CES) in Las Vegas, where the product received two awards. Uponor simultaneously announced the establishment of Uponor Pro Squad, an exclusive network of expertly trained plumbers and water specialists, to market and install Phyn Plus in North America. Phyn Plus will be available in the USA in the spring, whereas its introduction on the European markets is planned for 2019.

In February, Uponor invested an additional USD10 million in Phyn, bringing its total investment to USD25 million. With this second round of funding, Uponor established 50 percent ownership in Phyn, the other 50 percent being owned by Belkin.


Short-term outlook

In the first quarter of 2018, construction activity and demand in Uponor’s key building markets remained steady, overall, following the trends witnessed in the second half of 2017. If economic development continues to be stable and undisrupted, these trends are expected to continue in the near-term, supported by a variety of factors including rising employment, urbanisation and demographic needs, the adoption of new technologies, and the quest for more sustainable living environments. The main risks to this scenario are increased political tensions globally, and uncertainties related to the strength of the financial markets.

Uponor’s business segments are streamlined, efficient and have a competitive supply chain and manufacturing network. Our sales and marketing functions have been refocussed to align with customer segment needs and our strategic growth ambitions. In North America, capacity is being built up to meet growing customer demand, thus alleviating earlier capacity restraints. On the application side, Uponor continues to work hard to be at the forefront of the building industry’s digitalisation trends, and has already launched unique offerings in the niche sector of smart water technology.

Assuming that economic and political developments in Uponor's key geographies otherwise continue undisturbed, Uponor repeats its earlier, 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

Nasdaq Helsinki

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 -