The last quarter of 2023 was robust. Adjusted EBITDA reached EUR 21.1 million, which was a significant improvement of 30 per cent compared to the corresponding period last year. For the full year adjusted EBITDA came in at EUR 92.3 million. This is a strong achievement in a year that saw weak demand, largely caused by destocking by our customers as well as corrections in our markets and most of our product lines. Earnings were in line with the financial guidance announced at the beginning of the year. During 2023, the whole of Purmo Group worked hard with margin management actions, which were evidenced by a strong improvement in adjusted EBITDA margin of 12.4 per cent, a 2.1 percentage point uplift from last year. At the end of 2023, our balance sheet was also strengthened, and the net debt to adjusted EBITDA ratio, based on the last 12 months adjusted EBITDA, was 2.38 (31 Dec 2022: 2.96). This gives us room to pursue acquisition opportunities.
Growth in earnings in Climate Products & Systems, and high adjusted EBITDA margin in Climate Solutions demonstrated our resilience
During the fourth quarter, net sales for the Climate Products & Systems division decreased by 17 per cent compared to last year as markets remained weak. Neither residential new construction nor renovation showed signs of improvement, even though we saw some markets stabilising towards the end of the year. However, the division achieved a 33 per cent increase in adjusted EBITDA for the quarter. For the full year 2023, the division improved its adjusted EBITDA by 10 per cent and reached a 13.3 per cent adjusted EBITDA margin; an increase of 3.4 percentage points compared to last year.
This performance demonstrated the operational strength and continuous efficiency improvement of the Climate Products & Systems division in an environment that showed a heavy volume decline. During the fourth quarter, we completed the closure of our manufacturing operations in Zonhoven, Belgium and strengthened our operations in Rybnik, Poland. These actions reflect our commitment to maintaining a high proportion of our manufacturing close to our customers in Europe.
In our Climate Solutions division, net sales declined by 9 per cent during the quarter. After a longer period of downturn, our Italian markets picked up towards the end of the year. The businesses in France and Brazil showed good growth for the quarter, providing confidence in our solution-selling strategy. Strong margin management actions continued within the division. As a consequence, the adjusted EBITDA grew by 13 per cent during the quarter compared to last year and the adjusted EBITDA margin by 3.5 percentage points. For the full year 2023, adjusted EBITDA declined by 21 per cent compared to the previous year and the adjusted EBITDA margin was at 15.6 per cent, which is close to last year’s levels despite the severe decline in the market and net sales during the year. Our solution-selling business in France demonstrated strong growth also in 2023, in addition to Ireland, which performed well during the year.
In 2023, both divisions remained focused on our strategy of offering solutions and systems across our core markets and developing unique relationships with Purmo Group’s more than 100,000 installer customers.
Accelerate PG programme’s target for 2024 increased to EUR 50 million
The strategy acceleration programme, Accelerate PG, continued to perform strongly and above targets during the quarter. Implemented adjusted EBITDA run-rate improvements reached EUR 30.1 million at the end of the year, which was higher than the earlier communicated target of above EUR 25 million. The periodic impact for the fourth quarter was EUR 6.4 million. The net working capital improvements within the programme were EUR 20.6 million at the end of 2023, which was above the original target of EUR 10 million.
As part of the programme, on 28 November 2023, we completed the consultation process concerning the discontinuation of our radiator production plant in Zonhoven and, on 10 January 2024, after the review period, we also communicated the launch of a consultation process to relocate our manufacturing from Hull, United Kingdom.
Thanks to the good results within the programme in 2023, we will move beyond implementing cost savings to growth initiatives in 2024. We have also upgraded the target for the programme for 2024. Cumulative adjusted EBITDA run-rate improvements will reach EUR 50 million, higher than the previously announced target of above EUR 40 million. We also aim for EUR 45 million in cumulative net working capital improvements by the end of 2024. This is above the earlier announced target of above EUR 30 million.
Agreement for supply of near zero-emission steel
In terms of sustainability, on 6 November 2023, we signed a binding agreement for the supply of near zero-emission steel during 2026-2033, when 140,000 tonnes of green steel will be delivered to us by H2 Green Steel. We also joined WWF Finland’s campaign ‘Ready For Green Steel’ to encourage steel producers worldwide to transition to low-emission production to mitigate the climate crisis.
Guidance for 2024
Wholesalers’ stock levels have stabilised, and the lower level of interest rates supports the expectations of a gradual market activity improvement. Our upgraded target for the strategy acceleration programme, Accelerate PG, further underpins Purmo Group’s outlook for 2024.
Adjusted EBITDA in 2024 is expected to be on a similar or higher level than in 2023 (EUR 92.3 million).
John Peter Leesi
CEO, Purmo Group Plc
This CEO’s review was published in Purmo Group Plc’s Financial statements review 2023 on 13th of February 2024.