Kingspan warns order intake in key markets is on the wane
Firm blames austerity measures for slump in business confidence
Published 16/11/2010 | 05:00
Cavan-based building materials firm Kingspan has warned that order intake in its most important markets waned in recent months and that positive sentiment evident in mid-year has eased as the impact of austerity programmes is felt.
The comments were made as the group said sales rose 6pc to €865m in the nine months to the end of September, with third-quarter sales 15pc higher following a "solid" performance in the UK and better sales in mainland Europe.
In an interim management statement issued by the group yesterday, Kingspan said that the Irish market "remains depressed".
Kingspan has forecast a full-year operating profit of between €62m and €65m compared to €62.7m last year.
Analyst Barry Dixon at Davy Stockbrokers said that margins at Kingspan remained under pressure and that the company was unlikely to reach the broker's €66.2m forecast operating profit for 2010, which he described as "disappointing".
The boost to third-quarter sales figures followed what Kingspan said was a "pattern of particularly strong order intake" during the preceding three-month period.
Activity at its Australian subsidiary was robust, with business there having grown "significantly" throughout the year, said the company.
Insulated panel sales, the most important segment for the group accounting for more than 50pc of turnover, climbed 20pc year-on-year during the third-quarter.
Combined sales from the division in the UK, Ireland and western Europe were up 16pc in the period.
"The medium-term project pipeline remained broadly flat through the period, where it had been gradually trending upward during the preceding year," warned Kingspan.
While order intake was 3pc higher in those markets during the third quarter, it "reduced noticeably" from the run-rate experienced in the second-quarter, the group noted.
Order intake in north America and central and eastern Europe "remained encouraging".
"The more positive sentiment evident around mid-year has eased back recently as the many individual national austerity programmes become factored into more tame macro forecasts for the year ahead," noted Kingpsan. "That broad cautionary sense has also crept into expectations for the construction market."
In its insulation boards segment, sales rose 21pc year-on-year and were 10pc higher when Kingpan's acquisition last year of an insulation business in Australia are stripped out.
"Despite government incentives being discontinued in Australia, the business in this region grew as high performance insulation gradually builds its presence," the company said.
Last week, Kingspan agreed to pay up to €126m to buy the European insulation manufacturing business of CRH.
Shares in Kingspan declined just under 1pc yesterday to close at €5.97.