Purmo Group delivered a clear margin expansion despite weak markets in the first quarter of 2024. No major signs of improvement in construction activity were visible in our core markets. However, we did see a sequential uptick of radiator orders in Central and Eastern Europe mainly due to some restocking and slight growing optimism regarding demand recovery. We continue to believe in and push our integrated system approach which delivers value for installers, and sustainable living for end-users.
Increase in the adjusted EBITDA in the Climate Products & Systems division, coupled with a clear margin improvement in the Climate Solution division
In the Climate Products & Systems division, we saw a pickup in radiator sales in a few regions, but experienced some weakness in other areas and product groups, leading to a decline of 9 per cent in net sales during the quarter. Demand remained generally subdued, although we noticed increasing optimism in a few markets such as Poland. Due to strong margin management, the adjusted EBITDA for the quarter grew by 5 per cent to EUR 23.7 million. Adjusted EBITDA margin improved by 2.1 percentage points from last year.
In the Climate Solutions division, we sell pre-fabricated and time-saving solution packages to our installer customers. In the first quarter, we saw continuing normalisation of the Italian market, with mixed development in other regions. As a consequence, net sales declined by 18 per cent. Even though the Nordic markets struggle in the general construction downturn, we completed an important agreement with Kastelli Talot Oy after the review period. Kastelli is the largest manufacturer of prefabricated houses in Finland. Purmo Group will design and deliver underfloor heating solutions, pipes and valves for Kastelli houses during 2024 and 2025. Although earnings in the division were supported by systematic cost savings, the adjusted EBITDA decreased by 11 per cent to EUR 5.6 million partly due to the strong comparison period last year. Nevertheless, the adjusted EBITDA margin increased by 1.4 percentage points compared to last year.
Shift to growth in the successful Accelerate PG programme¨
Our Accelerate PG programme continued to deliver increasing run-rate benefits in the first quarter. The programme delivered EUR 7.8 million adjusted EBITDA periodic impact in the quarter, and the total EBITDA run-rate improvements were EUR 34.1 million. Our programme’s target remains at EUR 50.0 million in run-rate improvements in adjusted EBITDA by the end of 2024. Whilst securing the targeted savings, we will pivot the programme towards generating sales growth with the same programmatic approach and attention to detail that has delivered great earnings improvements during the last years. In the growth phase, the programme targets approximately EUR 15.0 million adjusted EBITDA run-rate improvements by the end of 2025.
A road to carbon-neutrality: carbon offset radiator production started in the United Kingdom
As we wait for the green steel production in the H2 Green Steel plant in Sweden to begin, we started the production of electric radiators made of carbon offset steel in our factory in Gateshead, United Kingdom after the review period in April. In this green initiative, we utilise Arcelor Mittal’s registered green steel certificates allowing us to invest in a range of initiatives that reduce an equivalent amount of carbon emissions.
Guidance for 2024 unchanged, growth phase to start
In the first quarter of 2024, we started to gradually shift our focus to growth initiatives in the Accelerate PG programme. Due to the absence of broad-based, notable demand recovery, coupled with the APG programme and strong margin management, we keep our guidance unchanged. 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 January-March 2024 interim report on 24th of April 2024.
