Purmo Group Plc | Stock Exchange Release | 25 October, 2023 at 08:15 AM EEST
July-September 2023
- Net sales decreased by 19 per cent to EUR 176.1 million (216.3). The organic1 decline in net sales was 17 per cent.
- Net sales for the Climate Product & Systems division decreased by 17 per cent to EUR 143.0 million (171.3) and net sales for the Climate Solutions division decreased by 26 per cent to EUR 33.2 million (45.1).
- Adjusted EBITDA increased by 20 per cent to EUR 23.5 million (19.6).
- Adjusted EBITDA margin improved to 13.3 per cent (9.1) supported by strong margin management and solid performance in the Accelerate PG programme.
- EBIT was EUR 11.2 million (10.5), which was burdened by EUR -6.2 million (-1.0) of comparability adjustments mainly related to the Accelerate PG programme.
- Cash flow from operating activities improved to EUR 1.1 million (-2.2), mainly due to positive development in net working capital.
- Accelerate PG programme's adjusted EBITDA run-rate improvements amounted to EUR 22.4 million (EUR 16.5 million at the end of Q2 2023), of which periodic impact for the third quarter was EUR 4.8 million.
January-September 2023
- Net sales decreased by 19 per cent to EUR 568.2 million (697.5). The organic1 decline in net sales was 18 per cent.
- Net sales for the Climate Product & Systems division decreased by 18 per cent to EUR 457.0 million (557.9) and net sales for the Climate Solutions division decreased by 20 per cent to EUR 111.5 million (139.9).
- Adjusted EBITDA decreased by 7 per cent to EUR 71.1 million (76.6).
- Adjusted EBITDA margin improved and was 12.5 per cent (11.0).
- EBIT was EUR 35.2 million (40.5), which was burdened by EUR -13.8 million (-12.1) of comparability adjustments mainly related to the Accelerate PG programme.
- Cash flow from operating activities improved to EUR 7.9 million (-9.1), mainly due to positive development in net working capital.
- Adjusted operating cash flow (last 12 months) improved by 129 per cent to EUR 80.1 million (35.0).
¹ Excluding currency effects and impacts from acquisitions and divestments.
Financial guidance 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 upgrades the targets for the Accelerate PG programme for 2023 and 2024. Targeted adjusted EBITDA run-rate improvements will be above EUR 25 million (previously EUR 20 million) by the end of 2023. Cumulatively the targeted adjusted EBITDA run-rate improvements will be above EUR 40 million by the end of 2024 (previously EUR 40 million). Cumulative run-rate improvements of above EUR 40 million are expected to be reached by the middle of 2024, which is two quarters earlier than originally planned. The programme also targets net working capital improvements of more than EUR 10 million by the end of 2023 and more than EUR 30 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. However, inventory levels of wholesalers in Purmo Group's core markets have normalised. 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 | 7-9/2023 | 7-9/2022 | Change,% | 1-9/2023 | 1-9/2022 | Change,% | 2022 |
| Net sales | 176.1 | 216.3 | -19% | 568.2 | 697.5 | -19% | 904.1 |
| Adjusted EBITDA¹ | 23.5 | 19.6 | 20% | 71.1 | 76.6 | -7% | 92.9 |
| Adjusted EBITDA margin, %¹ | 13.3% | 9.1% | 12.5% | 11.0% | 10.3% | ||
| Adjusted EBITA¹ | 18.3 | 12.5 | 47% | 51.8 | 55.4 | -6% | 64.6 |
| Adjusted EBITA margin, %¹ | 10.4% | 5.8% | 9.1% | 7.9% | 7.1% | ||
| EBIT | 11.2 | 10.5 | 7% | 35.2 | 40.5 | -13% | 39.0 |
| EBIT margin, % | 6.3% | 4.8% | 6.2% | 5.8% | 4.3% | ||
| Profit for the period | 4.5 | 5.3 | -16% | 14.1 | 20.2 | -30% | 13.1 |
| Adjusted profit for the period¹ | 10.7 | 6.3 | 68% | 27.9 | 32.3 | -14% | 34.9 |
| Earnings per share, basic, EUR | 0.08 | 0.13 | -38% | 0.27 | 0.49 | -44% | 0.32 |
| Adjusted earnings per share, basic, EUR | 0.23 | 0.15 | 50% | 0.61 | 0.78 | -23% | 0.85 |
| Cash flow from operating activities | 1.1 | -2.2 | 7.9 | -9.1 | 31.1 | ||
| Adjusted operating cash flow, last 12 months¹ ² | 80.1 | 35.0 | 129% | 44.0 | |||
| Cash conversion¹ ² | 91.6% | 35.3% | 47.7% | ||||
| Operating capital employed¹ | 327.1 | 333.4 | -2% | 305.0 | |||
| Return on operating capital employed, %¹ ³ | 10.5% | -0.4% | 12.2% | ||||
| Net debt¹ | 238.4 | 288.3 | -17% | 275.2 | |||
| Net debt / Adjusted EBITDA¹ | 2.73 | 2.91 | -6% | 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 42 in the January-September 2023 interim financial report.
² Change in net working capital includes assets held for sale. The 2022 comparison figure has been restated by EUR 9.6 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 43 in the January-September 2023 interim financial report.
CEO's review
Adjusted EBITDA for the third quarter of the year reached EUR 23.5 million, which is 20 per cent higher than last year. This was a result of our strong operational execution delivering a 4.3 percentage point year-on-year adjusted EBITDA margin uplift despite the weak market environment. These significant and sustainable improvements will strengthen Purmo Group financially in the medium and long term and support our target for an adjusted EBITDA margin of above 15 per cent.
Climate Products & Systems improved its earnings while Climate Solutions was impacted by the market correction in Italy and a strong downturn in the Nordics
During the quarter, the Climate Products & Systems division's net sales declined by 17 per cent to EUR 143.0 million due to a continued weak market environment. However, the division improved its Adjusted EBITDA by 45% as a result of margin management actions, lower raw material costs, and structural efficiency improvements as a result of the Accelerate PG programme.
Net sales in the Climate Solutions division declined 26 per cent in the quarter. The majority of the division's sales are in Italy and the Nordics, which have seen a market correction and a major downturn during the year. Despite a challenging market environment, our solutions concept is gaining traction. The European energy renovation wave, in which gas boilers are exchanged for heat pumps, will drive a growing demand for complete solutions. Heat pumps produce lower-temperature water and need to be coupled with efficient emitters and controls for end-users to enjoy the benefits of increased energy efficiency. On the back of this development, we estimate that the demand for efficient radiators as a part of a heat pump system will increase strongly in the future.
Accelerate PG supported earnings and delivered a profit improvement of EUR 4.8 million for the quarter
Our strategy acceleration programme, Accelerate PG, continued to support our earnings development and delivered implemented adjusted EBITDA run-rate improvements of EUR 22.4 million at the end of the third quarter of the year. The periodic impact in the third quarter was EUR 4.8 million. These improvements were mainly related to pricing optimisation, procurement savings and cost reductions from changes to the operating model. In addition, we achieved improvements in net working capital efficiency. Thanks to the strong performance in the programme we upgrade the targets of the programme to reach above EUR 25 million adjusted EBITDA run-rate improvements in 2023, and above EUR 40 million in 2024. The programme also targets net working capital improvements of more than EUR 10 million by the end of 2023 and more than EUR 30 million by the end of 2024.
Strong pipeline of product and solution innovations during the quarter
During the quarter, we launched several product and solution innovations that are suitable for our customers wishing to easily replace their old heating systems and save more energy. Within complete solutions, we launched an easy-to-install offering in Austria, which will expand across Europe in the future. This solution combines our well-received ULOW heat pump radiator, underfloor heating products and a heat pump from one of our partners. It also includes other products from Purmo Group as well as service and support.
An important addition to our smart products was the iQ control system. It offers wireless connection and control of heating and cooling through any heat pump among many other advanced functionalities.
Full-year guidance unchanged
We maintain our guidance for 2023 thanks to strong measures to combat market headwinds. 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-q3-results
Teleconference lines: http://palvelu.flik.fi/teleconference/?id=10010613
Participants should register through the above link 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 3,170 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.
