Purmo Group Plc | Stock Exchange Release | 19 July, 2023 at 08:15 AM EEST
April-June 2023
• Net sales decreased by 26 per cent to EUR 180.3 million (245.0). Organic¹ net sales decline was 25 per cent.
• Net sales for Climate Product & Systems division decreased by 25 per cent to EUR 144.7 million (192.1)
and net sales for Climate Solutions division decreased by 32 per cent to EUR 35.8 million (52.9).
• Adjusted EBITDA decreased by 24 per cent to EUR 21.2 million (27.8).
• Adjusted EBITDA margin improved to 11.8 per cent (11.4) supported by successful margin management in both divisions.
• EBIT was EUR 9.0 million (15.9), which was burdened by EUR -4.2 million (-3.6) of comparability adjustments.
• Cash flow from operating activities was EUR 8.1 million (32.0).
• Accelerate PG programme's adjusted EBITDA run-rate improvements amounted to EUR 16.5 million of which periodic impact for the second quarter was EUR 3.4 million.
January-June 2023
• Net sales decreased by 19 per cent to EUR 392.1 million (481.2). Organic¹ net sales decline was 18 per cent.
• Net sales for Climate Product & Systems division decreased by 19 per cent to EUR 314.0 million (386.6)
and net sales for Climate Solutions division decreased by 17 per cent to EUR 78.3 million (94.7).
• Adjusted EBITDA decreased by 16 per cent to EUR 47.7 million (57.0).
• Adjusted EBITDA margin improved and was 12.2 per cent (11.9).
• EBIT was EUR 24.0 million (30.0), which was burdened by EUR -7.6 million (-11.1) of comparability adjustments.
• Cash flow from operating activities was EUR 6.8 million (-6.9).
• Adjusted operating cash flow (last 12 months) improved by 75 per cent to EUR 67.8 million (38.8).
¹ Excluding currency effects and impacts from acquisitions and divestments.
Financial guidance for 2023
Purmo Group reiterates its financial guidance for 2023. Adjusted EBITDA in 2023 is expected to be on a similar level to 2022 (EUR 92.9 million). Similar means being within +/- 5 per cent of the previous year.
Strong margin management demonstrates the strength of the underlying business of Purmo Group. Combined with the Accelerate PG programme being ahead of plan, it provides confidence in the outlook for the rest of the year. Purmo Group reiterates the previously communicated targets for the Accelerate PG programme - targeted adjusted EBITDA run-rate improvements of EUR 20 million by the end of 2023 and cumulatively EUR 40 million by the end of 2024.
The visibility for 2023 is limited due to macroeconomic uncertainties, and the market environment continues to be challenging in Purmo Group's addressable markets. Furthermore, the guidance also factors in that Purmo Group is building up capabilities to facilitate future growth. This has an impact on the company's cost base, and hence the net savings from the Accelerate PG programme.
Key figures
| EUR million | 4-6/2023 | 4-6/2022 | Change,% | 1-6/2023 | 1-6/2022 | Change,% | 2022 |
| Net sales | 180.3 | 245.0 | -26% | 392.1 | 481.2 | -19% | 904.1 |
| Adjusted EBITDA¹ | 21.2 | 27.8 | -24% | 47.7 | 57.0 | -16% | 92.9 |
| Adjusted EBITDA margin, %¹ | 11.8% | 11.4% | 12.2% | 11.9% | 10.3% | ||
| Adjusted EBITA¹ | 14.1 | 20.6 | -32% | 33.5 | 43.0 | -22% | 64.6 |
| Adjusted EBITA margin, %¹ | 7.8% | 8.4% | 8.6% | 8.9% | 7.1% | ||
| EBIT | 9.0 | 15.9 | -44% | 24.0 | 30.0 | -20% | 39.0 |
| EBIT margin, % | 5.0% | 6.5% | 6.1% | 6.2% | 4.3% | ||
| Profit for the period | 2.9 | 8.4 | -65% | 9.6 | 14.9 | -35% | 13.1 |
| Adjusted profit for the period¹ | 7.1 | 12.0 | -41% | 17.2 | 25.9 | -34% | 34.9 |
| Earnings per share, basic, EUR | 0.04 | 0.20 | -79% | 0.19 | 0.36 | -46% | 0.32 |
| Adjusted earnings per share, basic, EUR | 0.14 | 0.29 | -50% | 0.38 | 0.63 | -40% | 0.85 |
| Cash flow from operating activities | 8.1 | 32.0 | -75% | 6.8 | -6.9 | 31.1 | |
| Adjusted operating cash flow, last 12 months¹ ² | 67.8 | 38.8 | 75% | 44.0 | |||
| Cash conversion¹ ² | 81.2% | 37.0% | 47.7% | ||||
| Operating capital employed¹ | 321.3 | 307.3 | 5% | 305.0 | |||
| Return on operating capital employed, %¹ ³ | 10.8% | -1.0% | 12.2% | ||||
| Net debt¹ | 230.7 | 279.3 | -17% | 275.2 | |||
| Net debt / Adjusted EBITDA¹ | 2.76 | 2.66 | 4% | 2.96 |
¹ Purmo Group presents certain measures of financial performance, financial position and cash flows, which are alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority ("ESMA"). For the detailed definitions and reconciliation of alternative performance measures see page 41 in the January-June 2023 half-year financial report.
² Change in net working capital includes assets held for sale. The 2022 comparison figure has been restated by EUR 7.9 million impairment charges related to the business in Russia.
³ Comparative figures have been restated due to change in calculation of the key figure, see page 42 in the January-June 2023 half-year financial report.
CEO's review
In the second quarter of the year, we saw a market environment with low volumes and continuing weakness in both business divisions. Stock levels have normalised in the distribution channels, but we do not yet see restocking activities. Strong pricing and cost management actions, as well as our competitive position, supported us in improving margins in both divisions. Furthermore, raw material costs developed favourably during the quarter.
The Accelerate PG programme continued to deliver ahead of plan, which mitigated the impact of weak demand. The programme, which focuses on improving net sales growth, profitability, and net working capital efficiency, will support our financial development in 2023 and beyond.
Net sales for the Group declined by 26 per cent to EUR 180.3 million, and adjusted EBITDA fell to EUR 21.2 million; a decline of 24 per cent. Adjusted EBITDA margin improved to 11.8 per cent (11.4 per cent in the previous year).
Lower volumes but improved margins in both divisions
During the quarter, the Climate Products & Systems division faced a decline in volumes due to weakness in the European new construction and renovation markets. Nonetheless, the adjusted EBITDA margin improved to 12.0 per cent (against 11.1 per cent in the previous year) thanks to successful margin management. Net sales in the Climate Solutions division declined, primarily driven by further normalisation of trading conditions in the Italian market. The adjusted EBITDA margin was on a solid level at 18.4 per cent (16.4 per cent in the previous year) despite tough market conditions. Green transition, including energy efficiency, is expected to strongly support Purmo Group's business in the long-term.
Accelerate PG programme progressing ahead of plan
Our Accelerate PG programme is delivering improvements ahead of plan. Implemented adjusted EBITDA run-rate
improvements of the programme amounted to EUR 16.5 million at the end of the second quarter. Realised actions include pricing optimisation, overhead-cost reductions, purchasing savings and increased net working capital efficiency. We are confident that we will reach our targeted adjusted EBITDA run-rate improvements of EUR 20 million for the full year 2023 and EUR 40 million by the end of 2024.
As a part of the programme and in response to overcapacity in the panel radiator market, we have entered into consultation with employee representatives regarding our intention to discontinue the production of panel radiators at our plant in Zonhoven, Belgium.
Product innovations during the quarter
We brought two new product innovations to market. Electrical emitters are becoming increasingly important,
and as a result, we have launched the new Yali Plus radiator range. The Yali products will include the upgraded controls system Unisenza Plus with its integrated mobile application offering ease of use and additional functionality. In addition, we have upgraded materials in our PE-Xc pipe range allowing faster and more flexible installation for our customers.
Agreement on the sale of the Russian business
On 28 April we signed an agreement to divest all of our Russian operations to IPLS. Completion of the transaction
is subject to approval by the relevant regulatory authority in Russia, and it is expected to be received during the third quarter of 2023.
Financial guidance for 2023 remains unchanged
During the second quarter, Accelerate PG programme continued to show solid performance, and we responded
strongly to weak demand with efficient margin management. Consequently, we maintain our guidance for the full year 2023: Adjusted EBITDA in 2023 is expected to be on a similar level to 2022 (EUR 92.9 million). Similar means being within +/- 5 per cent of the previous year.
News conference and webcast for analysts, investors and media
The publication will be followed at 10.00 a.m. EEST by a live webcast and a teleconference to analysts, investors and media representatives. At the event, CEO John Peter Leesi and CFO Jan-Elof Cavander will present the results and answer questions in English.
Webcast: https://purmogroup.videosync.fi/2023-q2-results
Teleconference lines: http://palvelu.flik.fi/teleconference/?id=10010612
Participants should register through the above link if they wish to ask questions through the conference call lines. After registering they will receive a teleconference number and a code to join the call. Participants will be asked to press number 5 to join the queue for questions.
A recording of the event will be available at https://investors.purmogroup.com/ir-material/ shortly after the event has ended.
Purmo Group Plc
Further information:
Jan-Elof Cavander, Chief Financial Officer, Purmo Group Plc
Katariina Kataja, Head of Investor Relations, Purmo Group Plc, Tel. +358 40 527 1427
Distribution:
Nasdaq Helsinki Ltd
Principal media
investors.purmogroup.com
About Purmo Group:
Purmo Group is at the centre of the global sustainability journey, offering full solutions and sustainable ways of heating and cooling homes to mitigate global warming. We provide complete heating and cooling solutions to residential and non-residential buildings, including underfloor heating and cooling systems, a broad range of radiators, heat pumps, flow control and hydronic distribution systems, as well as smart products. Our mission is to be the global leader in sustainable indoor climate comfort solutions. Our approximately 3,160 employees operate in 24 countries, manufacturing and distributing top quality products and solutions to our customers in more than 100 countries. Purmo Group's shares are listed on Nasdaq Helsinki with the ticker symbol PURMO. More information: www.purmogroup.com.
