Business

Cavan-based Kingspan sees sales drop in first quarter as it warns on costs

Overall, the company tells investors it had a ‘reasonable’ first quarter despite a ‘sluggish start’ to the year

Gene Murtagh, CEO of Kingspan. Photograph: Alan Betson

Colin Gleeson
Fri Apr 26 2024 - 07:27

Cavan-based Kingspan saw sales drop marginally in the last quarter as the insulation specialist warned primary input costs could rise again in the near term.

Overall, the company had a “reasonable” first quarter despite a “sluggish start to the year due in part to seasonal factors”, it said in a trading statement for the first three months of the year. Kingspan holds it annual general meeting this morning.

Group sales approached €2 billion for the three-month period and were 1 per cent behind prior year, or down 8 per cent on an underlying basis.

Trading volumes overall were “positive” with pricing “stable” since the turn of the year albeit behind year-on-year reflecting lower raw material prices. “It is possible however that our primary input costs could rise again in the near term,” it said.

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By market, the Americas overall matched last year’s strong start, while Western Europe was “seasonally subdued for the most part, and was slow to get going”.

Elsewhere, central and eastern Europe remained “regionally tough”, while the Middle East and India recorded strong sales growth in the period.

Insulated panel sales were 6 per cent lower, or down 9 per cent on an underlying basis, although global sales volumes were up mid-single digit versus the first quarter of last year.

Order intake volumes at a group level grew year-on-year growth which Kingspan said “augers well” for sales activity in the second quarter.

Insulation sales were 13 per cent ahead in the first quarter buoyed by the acquisition of a controlling stake in Steico in early January. Yet underlying sales were 14 per cent lower as year-on-year reduction in pricing offset modest underlying growth in rigid boards.

Technical insulation, which experienced an expected slow start, has seen more momentum in recent weeks.

“Although it’s very much early days in our journey with Steico we are strongly encouraged by the market, channel and innovation opportunities,” Kingspan told investors.

Separately, the group entered the mineral wool insulation category in recent weeks with the completion of the acquisition of Bachl’s stonewool plant.

“The group’s spectrum of solutions is unrivalled in meeting the thermal, acoustic and fire performance needs of a vast array of building applications,” the company said.

Kingspan said the pipeline of data centre opportunities is “strong, and growing, in particular as the AI rush takes hold”.

Net debt at March 31st was €1.3 billion, which was an increase of €311 million, reflecting an aggregate increase in net debt of €364 million arising from the acquisition of the group’s controlling stake in Steico.

The group’s current liquidity is “very strong” with €1.7 billion in cash and undrawn facilities. The balance sheet is robust with leverage levels currently at about 1.2 times net debt to earnings before interest, taxes, depreciation, and amortisation.

The board is to instigate a share buyback program of 1.5 million ordinary shares, commencing after Friday’s AGM, in order to offset dilution from share issuances.

The group’s trading outlook remains “encouraging overall”. The “positive trends” seen in order intake for much of 2023 have continued into 2024.

“Order intake volumes in each month of 2024 to date have been stronger than the same month last year,” the group said.

“Year-on-year pricing levels ought to more closely match as we approach the midyear period. With much of the second quarter remaining we expect to deliver a broadly similar trading profit in the first half as we did in the same period in 2023.”

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter

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