16 Nov 2009 07:00
Kingspan Group Plc
Interim Management Statement
16 November 2009
Kingspan Group Plc, the leading international manufacturer of sustainable building solutions, today issues the following Interim Management Statement for the period from 1 July 2009.
As anticipated in the Half-yearly Financial Report, overall trading has been more steady over recent months and it is expected that operating profit for the year as a whole will be in the region of €60mn (after amortisation). This performance has been aided in part by the Group's fundamentally realigned cost base, minimal raw material inflation and a positive sales mix, with higher end products trading comparatively well.
With the exception of Western Europe, construction markets remain under significant pressure and in particular the non-residential sectors in Central & Eastern Europe and North America have both noticeably contracted in recent months. These markets are not anticipated to bottom out for some time yet.
Across the Group, volumes since mid year are firmer than in the first half, with the momentum continuing into quarter four. The exception to this is Access Floors, where demand patterns are traditionally late cycle in nature. In total, Group revenues on a constant currency basis in quarter three were down 28% on prior year, a slight improvement on the year to date figure which is down 29%. Overall, quarter three sales are up 5% on quarter two.
By major product group/region, the trend in volumes is set out below:
| % change 9 months to 30 Sept 09 versus 08 | % change H1 09 versus H1 08 | % change Q3 09 versus Q2 09 | |
| Insulated Panels UK/IRL | -43% | -45% | +17% |
| Insulated Panels Benelux | -19% | -18% | -3% |
| Insulated Panels Central and Eastern Europe | -30% | -28% | +11% |
| Insulated Panels North America* | -23% | -20% | +3% |
| Insulation Boards UK/IRL | -30% | -34% | +3% |
| Insulation Boards Western Europe | +7% | -7% | +18% |
| Access Floors Europe | -32% | -22% | -29% |
| Access Floors North America | -30% | -32% | -4% |
| Environmental & Renewables* | -25% | -23% | +6% |
* Sales revenue figures on a like for like and a constant currency basis.
As indicated above, the Insulated Panels businesses are trending towards some semblance of stability at present, although low rise commercial construction remains exceptionally weak globally. Whilst Central & Eastern Europe has shown positive quarter on quarter trend the movement is below what would be typically expected in that season. Insulation Boards performance has been supported by the bottoming out of new housing in Ireland, some improvement in UK new home construction, robust refurbishment sales, and a solid Western Europe. In Access Floors, the decline in office construction is clearly evident, and is almost certain to weaken further in the year ahead. The reversal in Environmental & Renewables would be seasonally expected, whilst the division is also benefitting from the mild recovery in the UK new home construction sector.
The Group's cost reduction programme, which commenced late 2007, has yielded annualised fixed cost savings of approximately €60mn. Some further reductions in a small number of regions are still likely to be required.
Cash generation has been exceptionally strong throughout the year, and net debt at the end of October was approximately €190mn, a significant reduction of approximately €110mn during the year. This figure is unlikely to change much in the remainder of the year. Capital expenditure will be in the region of €50mn, mainly reflecting the completion of the Kooltherm insulation facility in the Netherlands and the Thermomax solar tube facility in Northern Ireland. This figure is likely to be closer to €25mn in the coming year.
Looking Ahead
In general it is anticipated that the building environment will remain challenging during 2010. High rise is expected to weaken, and low rise commercial is expected to remain weak but stable, whilst residential is showing some signs of recovery. The Group remains committed to and focused on developing future market leading positions across a wider footprint and extending its product offering, while simultaneously recognising the acute pressures of today and the need to focus relentlessly on generating cash. This emphasis will further enhance Kingspan's balance sheet strength and its ability to capitalise on opportunities which are likely to arise during these times.
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