14 May 2009 07:00
Kingspan Group Plc
Interim Management Statement
14 May 2009
Kingspan Group Plc, the leading international manufacturer of sustainable building solutions, today issues the following Interim Management Statement for the period from 1 January 2009 to the date of this announcement.
Trading in the first four months of 2009 has been predictably tough, characterised by widespread reluctance from customers to commit to newbuild construction projects. Overall, sales have declined by 34% (-27% on constant currency) to €350mn compared to the same period last year and by 39% (-33% on constant currency) excluding acquisitions. This expected contraction in new building activity was partly offset by improving thermal standards, an encouraging trend in the residential refurbishment market, and timely action to reduce costs and working capital at all levels throughout the organisation.
The weakness in sales activity was most pronounced in the UK and Ireland, where sales into the non-residential sector suffered most. The rest of Western Europe performed more robustly, although lower than during the prior year, and the Central & Eastern Europe markets began the year markedly down on 2008 but should prove more steady in the coming months. Sales in North America were well up due to the insulated panels acquisition in the United States in September 2008. Excluding the effect of this business sales in this region were down and are expected to fall further for the remainder of the year. The acquired business performed well in the last quarter of 2008, and as anticipated at the point of acquisition, the first four months of 2009 showed a decline in revenues.
By product segment, Insulated Panels sales for the first four months were down 30% (-24% on constant currency), and down 41% (-35% on constant currency) excluding acquisitions. Order intake for Insulated Panels in UK, Ireland and Western Europe was down 43% in the four months, whilst the month of April was down 38% reflecting a marginal improvement. The project pipeline in the UK, a reliable lead indicator which trended consistently down from its peak in mid 2007, has stabilised for the last six months, albeit at much lower levels than in the past. This should be reflected in more stable sales over the coming months. In Central & Eastern Europe order intake in the first four months was down 49% and in North America it declined by 30%. Despite the current weakness, the longer term potential in the US remains very compelling, particularly as the building energy standards are set to rise substantially into the future.
Insulation Boards sales were down 32% (-23% on constant currency) in the first four months of 2009. This performance, ahead of general market conditions, was achieved through an improved mix of sales and a solid refurbishment market.
Environmental & Renewables sales were down 39% (-30% on constant currency). The year on year percentage decline in activity was significant but has been shrinking marginally month by month. Legal proceedings to recover losses arising from the supply of defective raw materials to this division's fuel tank business are progressing, and are being transferred by agreement to the Commercial Courts in London where they are expected to reach conclusion in 2010.
Access Floors sales were down 18% (-19% on constant currency) but, as expected the level of order intake activity, generally an indicator of sales for next year, was down substantially more and 2010 is likely to be the toughest in this segment's cycle. Despite this, margins remain reasonable, partly due to the impact of steel price reductions.
Off-site sales were down 70% (-66% on constant currency) due to the significant downturn in the Irish and UK new residential construction markets, which may well have reached nadir early this year.
Cost containment plans have been executed by the Group since the middle of 2007 and in the current year the fixed cost base has been lowered by an annualised sum of approximately €50mn. Working capital has been reduced in line with internal targets and further reductions will be achieved on both fronts through the remainder of the year to ensure balance sheet stability is maintained.
The breadth of markets within which the Group operates are showing varying levels of short and medium term activity, but there is now a general sense that the pace of deterioration has eased in recent months. While the economic environment is widely forecasted to continue stabilising, the Group is likely to experience further contraction in the near term, although at a reduced rate to that experienced to date.
As expected, the first four months have proven to be deeply challenging, and although the typical mid-year seasonal upswing is likely to be less evident than in the past, the Group anticipates some improvement in operating performance during the summer months. Medium term, Kingspan remains exceptionally well positioned, both in product and geography, to deal with the opportunities and challenges which it is likely to encounter.
Kingspan will issue its half-year financial report for the period ending 30 June 2009 on Monday 24 August 2009.
For further information contact:
Gene Murtagh, Chief Executive Officer Tel: +353 (0) 42 9698000
Dermot Mulvihill, Chief Financial Officer Tel: +353 (0) 42 9698000
Ed Micheau, Murray Consultants Tel: +353 (0) 1 4980300