17 Nov 2008 07:00
Kingspan Group plc
Interim Management Statement
17 November 2008
Kingspan Group plc, the leading manufacturer of sustainable building solutions, today issues its Interim Management Statement for the period 1 July 2008 to the date of this announcement.
The Interim Results announcement on 27 August 2008 noted that the contraction in construction markets and rising raw material prices would present challenges in the second half of the year for the Group. This has transpired, particularly through September and October, when the effects of the contraction in the global economic environment became more evident. This has resulted in further reductions in construction activity, particularly in the UK and Ireland. Residential construction in these markets has remained weak, and activity in the commercial sector has slowed markedly during the period. This trend has been caused largely by the significant tightening of development funding and a sharp reduction in consumer confidence. In contrast to this, activity in the commercial and industrial sectors in Western and Central Europe remained robust. The sectors which Kingspan serves in North America also displayed more resilience than other sectors in the period.
Across the Group, sales are down 9% in the ten months to 31 October compared to the same period prior year, but are down only 3% on a constant currency basis.
Insulated Panel sales revenues were down about 6% in the first ten months on a constant currency basis. Of this, the UK and Ireland were down 16% compensated by increases in Western, Central and Eastern Europe. Volume order intake for insulated panels shows a year on year decline of 4%, with the UK and Ireland down 19% compensated by increases in other regions. This reflects a recent further slowdown in the UK and Ireland, and some tempering of activity in Western, Central and Eastern Europe since the Interim Results.
Insulation Board sales revenues were down approximately 4% in the first ten months on a constant currency basis with volumes down 9%. This volume decline was partially compensated by increased selling prices and improved value mix. While insulation boards are making steady progress in Western and Central Europe, this was not enough to off-set the effects of the significant decline in construction in the main UK and Irish markets in the period.
Across the other product areas in the ten month period, on a constant currency basis, Environmental & Renewables sales were up 4%, Access Floors up 11%, and Offsite/Structural Products down 16%.
Raw material prices rose sharply through the first nine months of the year but have eased somewhat in October. A weakening market has resulted in a time lag in passing these cost increases on to the market which has resulted in lower margins. Margins have also been negatively impacted by increased transport costs and by reduced operational leverage due to the fall off in volume in certain areas. On the positive side, current indications are that steel prices will reduce further in the early part of 2009, chemical prices are expected to remain reasonably stable and transport costs should also reduce.
Against this backdrop the Group now expects to report a full year percentage decline in operating profits before exceptionals of approximately 33%.
In the light of reduced forecasts for the year ahead, a number of the Group's businesses have been undergoing a restructuring process which will be substantially completed by year end. Non-recurring exceptional items related to restructuring and related costs will impact the result for the current year by approximately €25 million.
Financial Position and Other Developments
On the 22 August the Group acquired Metecno Inc., the second largest insulated panel producer in the US, for a total consideration of $111 million.
Under the share buyback programme, circa 2.1 million shares were purchased since the 30 June for a consideration of approximately €12.5 million. This gives a total share buyback since the start of the programme of 5,237,017 shares or 3.06% of the ordinary shares in issue.
On 30 September the Group completed a five year syndicated revolving credit facility for €330 million with its bankers. At 31 October the Group had total facilities of €580 million. Net debt at 31 October was approximately €330 million. The increase in debt reflects the continued capital expenditure in new capacity mainly in Continental Europe and North America, albeit at a slower pace than anticipated.
Looking Ahead
Medium term, the Group remains confident that both its product and geographic strategy, together with its positioning at the heart of low energy building technologies will leave it well poised to take full advantage of renewed market opportunity once economic growth resumes. Additionally, Kingspan's ability to continue to invest in the future development of the business is underpinned by a strong balance sheet that has been reinforced by the recent €330 million refinancing of its five year facilities. In the short term, management are continuing to take significant actions and initiatives to reduce costs in anticipation of the fact that 2009 is almost certain to provide even tougher challenges than those encountered in the current year.
For further information contact:
| Murray Consultants | Tel: +353 (0) 1 4980300 |
| Ed Micheau | |
| Buchanan Communications | Tel: +44 207 466 5000 |
| Tim Thompson/Jeremy Garcia |