Kingspan sales up 15% as margins face squeeze in H1 2018

Kingscourt, Ireland — Sales at  insulated panel company Kingspan were up 15% to EUR 2bn, and trading profit was up 10% to EUR 195.6m in the first half of 2018.

But sales growth has slowed and margins have shrunk at the Irish insulated panel maker.

Sales grew by 19% in first half 2016 and 2017, and in the first half of 2017, margins were 10.2%. In the 2016 half they were 11.4%, and this half year margins were 9.7%.

Chief executive Gene Murtagh said: 'We delivered record performance in the first half of the year, with revenue over EUR 2bn for the first time.

'Performance was helped by improved momentum in the second quarter after a sluggish start to the year due to the prolonged winter.

'It is conceivable that activity in the UK could ease in the run up to the crunch point of EU negotiations; we anticipate the relative strength of Western Europe and the Americas should compensate for that.'

In the insulation board market revenue rose 15% in the first half of 2018 to EUR 428.9m. This compares to EUR 373.7m in the first half of 2017.

In the UK, insulation board sales revenue grew significantly in the first half with 'strong performance of Kooltherm [phenolic board], combined with the inflationary benefit of our PIR range experienced'. Kingspan said it had been able to pass on most of the price rises in diisocyanates. It added that the prices are 'expected to unwind during the current year'. But volumes fell as the company maximised margin over volume.

On mainland Europe, business was mixed in the half. The Benelux PIR market was weak in the first half. However, there was 'strong progress in the Nordics and very solid performance in roofing in the Netherlands'.

In Australia and the Middle East, business is progressing well so far this year. The company will move from PIR/polyurethane for its its ducting products in the region to phenolic. This is to meet increasingly stringent building codes.

The Irish business benefited from rebuilding in the country. This helped the engineered timber frame business.

Insulated panels generated revenue of EUR 1.3bn in the first half of 2018 compared to EUR 1.1bn in 2017.  That is 14% growth. Kingspan said business in Western Europe was slow in the first quarter because of the long winter.

Kingspan added, 'Southern Europe is a new frontier with the acquisition of Synthesia. Revenue in this region has experienced good growth.' Kingspan announced the Synthaisa deal was complete in March 2018.

The UK market is tough and this will continue until the outcome of Brexit negotiations are clear. But second half revenue is 'comfortably ahead of 2017'.

Business in the US started the year slowly, but by the end of the half the regions orders were at record levels. 'Penetration rates in the US lag Europe by a stretch and we are optimistic about the scope for the shift toward energy-efficient buildings,' the company said.