Half-Year Financial Report 2023: Strong margin in a volatile environment

Uponor Corporation, Stock Exchange Release, 20 July 2023 at 09:00 am EET

Half-Year Financial Report 2023: Strong margin in a volatile environment

April–June 2023 in brief

  • Net sales were €315.6 (396.2) million, a decrease of -20.4% or -19.1% in constant currency terms.
  • Operating profit was €35.5 (42.8) million or 11.2% (10.8) of net sales.
  • Comparable operating profit was €41.4 (50.5) million or 13.1% (12.7) of net sales.
  • Earnings per share were €0.29 (0.34).
  • After the reporting period, Uponor revised its guidance statement for 2023.

January–June 2023 in brief

  • Net sales were €644.9 (745.7) million, a decrease of -13.5% or -12.3% in constant currency terms.
  • Operating profit was €85.0 (89.6) million or 13.2% (12.0) of net sales.
  • Comparable operating profit was €86.9 (97.7) million or 13.5% (13.1) of net sales.
  • Earnings per share were €0.71 (0.79).

Guidance statement for 2023 (updated on 19 July 2023)
Due to structural changes, Uponor expects its net sales, excluding the impacts of currencies, to be between €1,250 and €1,350 million in 2023, and its comparable operating profit margin to be at or above 11%.

Short-term market outlook
Uponor expects that construction markets will remain soft overall, especially in the new housing segment, in the second half of the year 2023. While key indicators in some markets have shown early, tentative signs of stabilisation, the construction market continues to experience significant headwinds. Elevated mortgage interest rates, the effects of inflation combined with high levels of uncertainty amongst consumers and businesses, are expected to continue to constrain the initiation of new construction projects and, to a lesser extent, investments in renovation.

Michael Rauterkus, President and CEO, comments:
“Our second quarter performance demonstrates we are delivering on our ambition to maintain strong margins also in a tough operating environment. The second quarter saw us achieve a strong comparable operating profit margin of 13.1% (12.7%) exceeding previous year’s level. Our net sales adjusted for structural changes decreased by 16.7% due to soft overall market demand. We are already seeing the benefits of our ongoing transformation and new operating model which helped us to deliver such a strong profitability.

I have been impressed by our personnel's ability to quickly adapt to change, taking decisive actions when needed and their commitment to Uponor's long-term success. I would like to extend my sincere thanks to all Uponorians for their excellent work in driving our transformation and financial performance.

Building Solutions – North America achieved a great result exceeding previous year’s comparable operating margin level. Net sales were at the same level as previous year supported by strong demand generation activities, price discipline and wholesalers normalising stock levels. Our North American team’s robust operational performance proves the divisions’ sustainable ability to generate profits.

Uponor Infra’s net sales were impacted by lower market demand and structural changes, including the divestment of the District Energy business and closure of the Middelfart factory in Denmark. However, in line with our strategy to focus on the profitable core, the comparable operating profit margin improved supported by a favourable product mix and execution of the ongoing Group-wide transformation programme. In the quarter, Uponor signed an agreement to gain full ownership of the Uponor Infra business that has been a joint venture with KWH Group. As sole owners of the business, we will be able to fully execute our profitable growth strategy and capture all benefits of investments made into the business. The transaction is expected to close in the third quarter of 2023.

In Building Solutions – Europe, net sales decreased compared to a strong comparison period driven by pricing and due to low demand in our key European markets, especially in the Nordic countries. The comparable operating margin was negatively impacted by lower volumes and a loss-making unit for which corrective measures are being taken. The transformation towards a leaner and more customer-centric organisation in Europe is progressing at fast pace.

Our strategy execution progressed as planned. In line with our strategy to Maximize the Core, the concept of global product category management (Water systems, Energy systems, Installation systems and Infra systems) was introduced to further support our global growth strategy and ensure we are running the company through a systematic 4 C approach (Customers, Channels, Categories, Countries) in all geographies. The new category structure will not affect our external financial reporting structure. To drive our company’s innovation engine, Uponor’s R&D organization will now be aligned to the key product categories to better respond to customer needs and market opportunities, while at the same time driving efficiencies and product cost savings. This model will keep customer needs and market requirements at the centre of our innovation work and enable us to develop differentiated offerings, new platforms and disruptive breakthroughs.

In line with our People First agenda. I was also pleased to see that the positive development in our safety performance continued. Our lost time injury frequency rate, LTIF, for the first half of the year improved to 3.6 (8.0).

We maintained strong momentum in the execution of our Transformation programme. Big steps have been taken towards improving our operational excellence transforming Uponor into a leaner and more resilient company. The actions implemented so far within the programme are expected to generate annualised savings of €16.7 million of the total targeted €30 million cost savings by the end of 2024. I am confident that this transformation will strengthen our customer focus and competitiveness in a changing operating environment.

Uponor is in pole position to benefit from the strong megatrends driving mid-and long-term demand for sustainable and energy-efficient heating and cooling systems as well as systems for safe and clean water in our markets. However, in the second half of 2023, we are prepared for continued high market volatility and a soft demand picture. While some U.S. indicators are gradually turning promising, European indicators remain decidedly negative impacted by the subdued short-to-mid-term economic outlook driven by volatile interest rates and the effects of inflation.

Considering our robust profit performance in the first half of 2023, we are revising our full-year guidance. We now expect the comparable operating profit margin for 2023 to be at or above 11%, compared to our previous guidance of above 10%. Furthermore, due to the divestment of our District Energy business (approximately €40 million in annual net sales) and closure of factory in Denmark, we have adjusted downwards our full-year net sales guidance range to €1,250-1,350 million, compared to our previous guidance range of €1,300-1,400 million.

Looking ahead, backed by our robust strategic plan, the agility of our business model and healthy balance sheet, we are well equipped to achieve our strategic targets. We focus firmly on our profitable core, executing our transformation and delivering value to our customers through leading the change in sustainable water solutions.”

Key figures

M€ 4–6/20234–6/2022Change1–6/20231–6/2022Change1–12/2022
Net sales315.6396.2-20.4%644.9745.7-13.5%1,386.2
Operating expenses270.1340.5-20.7%548.6630.3-13.0%1,197.8
Depreciation and impairments12.913.1-1.3%25.926.0-0.6%54.5
Operating profit35.542.8-17.1%85.089.6-5.2%135.5
Operating profit, %11.210.8+4.1%13.212.0+9.6%9.8
Comparable operating profit41.450.5-18.0%86.997.7-11.1%153.7
Comparable operating profit, %13.112.7+3.0%13.513.1+2.8%11.1
Financial income and expenses-2.00.3-688.5%-3.9-0.6+533.7%-1.0
Profit before taxes33.643.2-22.2%81.189.1-8.9%134.9
Profit for the period23.529.6-20.6%57.662.9-8.4%97.5
Earnings per share0.290.34-14.2%0.710.79-9.2%1.21


30 Jun30 JunChange

31 Dec
Net working capital, M€150.5165.3-9.0%164.5
Net-interest bearing debt, M€20.477.0-73.6%48.5
Solvency, %51.949.2+5.5%55.2
Gearing, %3.815.1-74.8%9.1
Return on investment, %25.329.8-15.0%22.2

Results briefing and live webcast
A live webcast for analysts, institutional investors and the media will be broadcast on Thursday, 20 July at 14:00 EEST. The briefing is in English. Uponor’s President and CEO Michael Rauterkus, CFO Markus Melkko, CTO Thomas Fuhr and President of Building Solutions-North America Andres Caballero will be present at the webcast. The webcast and its recording can be viewed via our website at uponorgroup.com > Investors > Reports and presentations or via the Uponor IR mobile app along with all presentation materials.

Uponor Corporation’s financial calendar for 20232024
25 Oct 2023        Interim report 1–9/2023
16 Feb 2024        Financial Statements 2023 Bulletin
13 Mar 2024        Annual General Meeting 2024
19 Apr 2024         Interim report 1–3/2024
18 July 2024        Half-Year Financial report 1–6/2024
23 Oct 2024         Interim report 1–9/2024

For further information, please contact:
Markus Melkko, CFO, tel. +358 20 129 2038
Franciska Janzon, Senior Vice President, Communications and IR tel. +358 20 129 2821

Nasdaq Helsinki

Uponor in brief
Uponor is a leading global provider of solutions that efficiently and effectively move water through cities, buildings, and homes. We help customers in residential and commercial construction, municipalities, and utilities, be more productive – and continuously find new ways to conserve, manage and provide water responsibly, unlocking its potential to provide comfort, health, and efficiency. Our safe drinking water, energy-efficient radiant heating and cooling systems, and reliable infrastructure solutions are sold in more than 80 countries. Uponor employs about 3,750 professionals in 26 countries in Europe and North America.
In 2022, the company’s net sales totalled approximately €1.4 billion. Uponor Corporation is based in Finland and listed on Nasdaq Helsinki. www.uponorgroup.com