Kingspan shares tumble on UK sales

by Geoff Percival

Kingspan shares fell nearly 9% after the Cavan-based specialist building materials group warned of a slowdown in the UK construction sector, its largest single market.

In an otherwise upbeat trading statement, Kingspan said it has recently experienced “a sense of near-term indecision around order placement” for insulated panels in the commercial and industrial sectors in the UK, where it generates around a quarter of its total group revenues.

The group’s access floors business saw sales rise by just 2%, year on year, in the first nine months of 2017 and by 4% in the third quarter. Growth has been affected by a “softening” in UK office-building activity, while the US commercial-construction market has remained flat.

Kingspan added that its “future activity tracker” in the UK remains “modestly” ahead of this time last year. It added that sales of insulation boards — via its high-performance Kooltherm brand — were strong in Ireland, the UK, and across mainland Europe.

The group’s share price tumbled by as much as 8.6% yesterday — at one point wiping around €500m from its market value — before paring back marginally.

Kingspan’s management has publicly been adopting a ‘wait and see’ approach towards Brexit, in August suggesting the only sign of an impact on the UK construction sector had been a small decline in planned office-build projects in the London area.

However, data last week suggested UK construction fell by 1.6% in September, with sentiment among building firms dropping to the lowest level in nearly five years.

The UK is still Kingspan’s largest single market, in revenue terms, though its lead is shrinking as sales grow in other markets.

On an overall group basis, Kingspan said revenues rose 19%, year on year, in the first nine months of the year to €2.69bn. Sales in the third quarter alone were up 17%. Underlying sales — stripping out currency movements and contributions from acquisitions — were up 11%, year on year, over the first nine months.

Kingspan has guided for full-year trading profit growth of 10%, to around €375m, assuming current exchange rates prevail.

Davy is keeping with its forecast for Kingspan, of trading profits of €378m, which would be up 11% on last year.

On the slowdown in UK orders, it said that “it is unclear whether this is a blip or represents a more profound shift, but it is clearly a concern”.

Davy also suggested ongoing pressure from higher chemical prices could result in short-term margin pressures.


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