On a water shed
Fast and deep fluctuations in economic trends are commonplace phenomena also in the European HVAC market. The economic uncertainty of the fiscal year had a heavy impact on Oras.
The relatively good demand in the market during the early part of the year turned into an increasing uncertainty and caution after the summer. A considerable increase in the prices of raw materials led to a great pressure to raise prices, which in turn contributed to the anxiety in the market.
Project sales were considerably more stable than retail sales, which fluctuated in sync with the economic news in the media. The first signs of the slowdown in demand were seen during April and May. The unstable market situation led to lowered inventory levels in all our key markets and this caused a drop in turnover compared to the previous fiscal year (-2.6 % vs. 2010).
The net sales of Oras Group were EUR 129.0 million (EUR 132.5 million). Uncertainty in the market and high raw material prices burdened the operating profit, which came in at EUR 12.4 million, which was 9.6 % of net sales (EUR 18.8 million and 14.2 %).
Oras’ strategy aims at user-friendliness and at saving water and energy. At the beginning of 2011 the range of touchless faucets for homes was expanded with new design products. Oras Eterna, the most recent outcome of our strategy, was introduced in the autumn. The product was received even more positively than expected, and its completely new features convinced our distribution network. Eterna represents Oras’ core competence at its best: new innovative technology is user-friendly and saves water and energy.
Building on the company’s values and strategy, Oras’ leadership principles were defined during the early part of the year. Within this framework a leadership development programme “Agile and United” was tailored for the Group. During this programme all managers within the Group participated in theoretical and practical exercises which will support them in their tasks as the responsibility and challenges increase.
Action time
The demand situation in Oras’ key markets is likely to remain unstable due to the financial crisis in Europe, and the distribution network as well as the consumers can be assumed to remain cautious. The prices of raw materials are expected to remain high and even to rise towards the end of the year. As our entire cost structure in under considerable pressure, we will take the measures that are necessary to ensure the improvement of productivity and cost competitiveness.
During 2012 Oras will launch competitively-priced new products that are based on the company’s core competences. A new logistics centre started its operations in February 2012; at the first stage the centre will serve the Swedish market. During the year the centre will start deliveries to Norway and Denmark as well.
The fragmentation of sanitary fittings market is stronger and stronger today, both in terms of distribution as well as price points. The channels to the market are in strong transition and the price erosion in the traditional products is fast. The market factors, manufacturers as well as distributors, have arrived at a watershed. Either one develops the market or exposes oneself to the unambitious price war of mass products. The latter option benefits no one. The situation requires choices, courage to question the status quo, and working with chosen partners on a long term.
Oras’ strategy is clear. We have chosen a path which will lead us to develop products that make the use of water more enjoyable while saving water and energy. This path also means that we deepen our good relationships with key partners.
I want to thank our employees and partners for the year 2011. The times are tough and actions, as difficult as they may be, are necessary to maintain our competitiveness.
Pekka Kuusniemi
President and CEO