Cavan, Ireland - Building products and insulation group Kingspan Group plc says profitability has been lower so far this year, as a result of the tougher economic climate in the UK, although revenue has held up, at constant exchange rates.
The major maker of rigid polyurethane insulation products said measures aimed at reducing overheads to meet the tightening environment include some plant closures and headcount reductions in the UK and Irish Offsite businesses, said Kingspan, but gave no further details.
Meanwhile, in its insulation business, Kingspan's expansion continues, with new lines inthe UK and a panel line in the Czech Republic being commissioned by mid year. Other expansions are planned worldwide.
In a statement ahead of its Annual General Meeting on 15 May, Kingspan said, following record growth and profitability last year, the "widely flagged" tightening of economic conditions have made trading so far in 2008, "more challenging than in recent times."
"Both the UK and Ireland have continued to slow particularly in new residential construction," the group added. The economic backdrop in mainland Europe was steady during this period, and central & eastern Europe (CEE) continued to grow, said Kingspan.
Sales revenue for Kingspan Group has been at a similar level to that in 2007. Flat sales of insulated panels hide a 17 percent decline in the UK and Ireland, "broadly offset by strong growth in CEE and other markets." Insulation boards achieved a modest increase, and again a drop of 8 percent in the Irish market was offset by continuing growth in the UK and the rest of Europe.
Changes in the dollar/euro and sterling/euro exchange rates caused a 6 percent decline in sales revenue, Kingspan said.
Despite the satisfactory top line, Kingspan said its geographical mix of sales and currency weaknesses have both adversely affected profitability. Also, said the group, raw material and especially steel costs, are escalating. A time lag in recovering these inputs, is likely to result in continued margin pressure over the remainder of 2008, Kingspan warned.
In terms of forward orders, those for insulated panels in the UK and Ireland are down around 16 percent for the year to date, but are well up in CEE, said the group.
Kingspan said it continues to invest in new technology and geographic expansion, anticipating that stronger building regulations on energy and heat loss will continue to drive growth in its insulation businesses, which make both boards and panels.
The company will commission a new panel line and a new board line in the UK in the second quarter, and a panel line in the Czech Republic around mid year, and said new capacity is being added in Canada, Poland and the Netherlands, all due on stream in mid 2009.