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Kingspan predicts 10% decrease in Profits
15th May 2010
Irish building products conglomerate Kingspan Group Plc, best known to oil heating technicians as manufacturers of Armet, Atlas, Deso, Kingspan, Mayweld, PC Rotomoulding, Roug and Titan oil storage tanks, has issued an Interim Management Statement for the period from 1 January 2010.
According to the Group, trading in the first four months of 2010 was characterised by a largely weather related slow start to the year, followed by a noticeable pick-up in activity levels in the latter six weeks or so. Overall sales revenues declined approximately 6% on the prior year. This recent and improving activity pattern is anticipated to continue for the coming months which, considering the pronounced weakness in January and February, should result in a decline in operating profit of approximately 10% in the first half of the year. There has been no significant change in the Group's net debt since year end.
In the UK, the company claims market conditions have been stable, aided by some improvement in residential construction and a solid outcome in non-office related commercial building activity. By contrast, in the Republic of Ireland conditions in the newbuild market have weakened further. Mainland Europe began the year at a weaker pace than a year earlier, but the Group reports improvements during recent months, particularly in Germany. North America low rise non-residential has been solid for the company, but office activity has weakened, albeit in line with expectations.
The Group's Environmental & Renewable Division, which includes the company's tank manufatcturing interests and Sensor Systems Watchman business, benefited from product price increases announced toward the end of 2009. The Division delivered a credible performance with sales revenues declining by just 3%. The company claims the decrease largely reflected weaknesses in Mainland Europe, particularly in solar products. By contrast, Hot Water Systems in the UK have improved in line with the mild recovery in residential construction.
In its statement, the company notes that raw material costs, particularly in steel, have seen sharp increases in the early part of the year, the lag effect of which will pressurise margins overall in the second quarter. Although difficult to predict, the likelihood is that steel prices could be pushed up further in the near term, presenting a significant variable to manage as Kingspan enters the seasonally stronger summer months.
Looking ahead, the Group claims the sense of nervousness that prevailed in all of the Group's markets a year ago, is less evident at present. This growing stability, combined with encouraging order intake, further penetration growth in Western Europe and the US, and with the benefit of prior cost reduction programs, leads Kingspan's Board to believe there is scope for a degree of measured optimism through 2010.
Kingspan will issue its half-year financial report for the period ending 30 June 2010 on Monday 23 August 2010.
