Sales fall 5% at Kingspan but group eyes full year trading profit

Insulation group Kingspan reported a 5 per cent decline in sales in the first nine months of the year, but pointed to "strong" trading at present, and said it expects its full year trading profit to be "marginally ahead" of 2019 (€497m).

In a trading update to the market, the Irish headquartered high performance insulation and building envelope solutions group said that in the nine months to September 30th, sales fell by €3.27 billion, or 5 per cent, on the same period in 2019. Underlying sales (pre currency and acquisitions) were down 10 per cent. However sales advanced by 1 per cent the third quarter, with the company pointing to “strong” trading in the fourth quarter.

Overall, the company said that its end markets “are in reasonable shape bearing in mind the uncertain and evolving backdrop”, but added that it is “difficult to see too far ahead”.

“Our raw material costs are on the rise at present and, with the customary lag anticipated, a challenging recovery effort is underway. Trading in the fourth quarter to date has been strong helped to an extent by accelerated demand in the expectation of inflation led price increases in the coming months. Whilst conscious that much of the seasonally variable fourth quarter is still at play, in what is an untypical year, we expect to deliver a full year trading profit marginally ahead of 2019”.

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The group’s insulated panel division saw sales fall by 6 per cent in the first nine months, and by 3 per cent in the third quarter, with underlying sales down 10 per cent year to date and down 7 per cent in the third quarter.

Insulation board sales in the first nine months were down 14 per cent and down 5 per cent in the third quarter. Volumes improved through the third quarter with raw material related price deflation in the earlier part of the period partially offsetting this.

Light and air sales in the first nine months were up 30 per cent and up 46 per cent in the third quarter.

Data and flooring sales in the first nine months were up 6 per cent and up 7 per cent in the third quarter, while water and energy sales in the first nine months decreased by 5 per cent and increased by 4 per cent in the third quarter “with waste water and rain water harvesting solutions notable positives”.

Net debt at the end of September 2020 was €312 million. Kingspan said that working capital is somewhat lower than is typical, “although it is expected to normalise in the coming months”.

In a note, stockbroker Davy said that the group’s earnings delivery remains “hugely impressive” and the valuation underlines the premium investors increasingly place on high quality business models.