Kingspan falls most since April amid sales slowdown

Kingspan shares fell the most since April, after the insulation giant posted a drop in sales over the first nine months of the year even as it expected to report a record profit for 2023.

Shares in the Cavan-based company fell 5.3 per cent in Dublin to close at €65.70. That was the share’s biggest fall since April 7th, as the firm recorded revenues of €6.14 billion in the nine months to the end of September. That was “down a touch on the same period in the prior year and in the third quarter”, Kingspan said. “Sales pre currency and acquisitions were down 7 per cent in the year to date and in the third quarter,” it said.

“It is difficult to look too far ahead in this environment,” Kingspan said. “Whilst end markets have their obvious challenges the global backlog of orders has remained reasonably stable over the last number of months.” Even so, the company said it expects to make a record profit of €875 million for 2023.

“With commodity inputs weak, there is no rationale for upwards momentum in top line pricing, in our view,” Morgan Stanley analysts including Cedar Ekblom said in a research note. “We see only moderate growth potential for FY24 trading profit as a result with our estimate -2 per cent vs consensus.”

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Sales fell across most of its divisions. The insulated panels unit, which accounts for close to two thirds of Kingspan’s business, saw revenue drop 9 per cent in the third quarter and is now 10 per cent lower for the year to date compared with 2022, while volumes were “up mid-single digit globally”.

“Activity in the Americas remains strong overall, France is robust, the UK market has weakened considerably since midyear with central and eastern Europe stable at sluggish levels of activity,” the company said.

Meanwhile the insulation business, which made up about a fifth of the company’s activity in 2022, saw sales slump 10 per cent in the quarter and were 7 per cent behind for the first nine months of 2022.

Kingspan’s pricing in its insulation division was a disappointment, the Morgan Stanley analysts said.

“Acoustic insulation is performing well and we continue to make inroads in the natural insulation category which will be boosted further by our acquisition of 51 per cent of Steico, expected to complete early in 2024,” the company noted.

Data and flooring was one of its few areas of growth, with sales up 3 per cent between July and the end of September.

Kingspan’s net debt at the end of December 2023 is expected to reduce by a third versus prior year to approximately €1.05 billion.

This incorporated a development spend (acquisitions and capex) of €450 million in the current year. The group’s working capital investment is now back to more normal levels of efficiency than the elevated position in the prior year, it said.

“We consider this a very solid achievement, characterised by impressive strength in Kingspan’s operating margin at a time of weakness across the building products sector,” Davy Stockbrokers said.