Ferro Acquires Heating Polska: Strategic Move in the Heating Systems Sector
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Ferro acquired a 100% stake in Heating Polska, a limited liability company based in Konin, for PLN 9.65 million. In 2022 revenues of Heating Polska (without transactions with the Ferro Group) reached c. PLN 16 million. The cash position less financial liabilities is positive. This is not a huge transaction for Ferro and in the ST horizon we see it as neutral (without any material impact on the Company’s financials, in our view), albeit from the strategic perspective it may be beneficial. Heating Polska operates on the heat pump market and offers heat pumps used to heat buildings and for a warm utility water which comply with modern control systems. Heating Polska provides training for professionals in the area of heat pumps selection and installation, it cooperates with the network of authorized service technicians and distributors.
The Ferro Group has cooperated with Heating Polska as well. This acquisition is part of the Strategy F1R2 execution and according to the Group’s management will support the further development of the RES segment enabling it to provide the comprehensive offer in the heating systems area. The Group’s know-how will increase with regard to the design and selection of heat pumps and specialist training organization which will address the Group’s needs as far as the assembly and maintenance is concerned.
The heating systems segment seems very prospective, however this year it has been reporting material revenue declines and is Ferro’s weakest segment. We forecast the segment of batteries and accessories/ installation fittings/ heating systems (Termet/Tester) generated 48%/ 35%/ 16% of 1H23 consolidated revenues vs 46%/ 33%/ 19% in 2022. In FY22 a sales growth in the segment of batteries and accessories/ installation fittings/ heating systems hit 8%/ 19%/ 4% yoy (mainly thanks to 1Q22 results), while in 1H23 we assume a 15%/ 11%/ 34% yoy decline.
Heat pumps
According to European Heat Pump Association (EHPA), in 2022 the volume of heat pumps sold in Poland grew over 100% yoy which made Poland the leader in Europe as far as the growth rate was concerned. According to PORT PC (Polish Organization for Heat Pumps Technology Development) data, in 1Q23 the upwards trend on the market of heat pumps for buildings continued (a 64% yoy growth of sales of airto-water heat pumps) with projections indicating a 20- 30% growth for air-to-water heat pumps and 40-50% for ground (geothermal) heat pumps in 2023. However, in July a slump of the sales growth was reported while the distributors’ warehouses were fully stocked and projections needed to be modified. Ultimately, PORT PC revised projections which now assume that in 2023 sales of ground heat pumps should grow 20-30% yoy with a 20-30% drop of sales of air-to-water heat pumps (in the worst case scenario: down 40% yoy). The return of the upwards trend is expected in 2024.
