February 23, 2018 / 8:33 AM / 3 months ago

Kingspan hit after warning of sharp slowdown in UK demand

DUBLIN, Feb 23 (Reuters) - Kingspan expects a sharp slowdown seen in demand in Britain for its insulated panels to carry on because of what it termed the “Brexit quagmire”, hammering the Irish building materials group’s share price on Friday.

Reporting its full year results, Kingspan said that while the British market performed resiliently for much of the year, indecision over orders became more evident as fewer large scale non-residential projects came to the market towards the end of the year.

The trend it flagged in November has continued in 2018 with the value of its UK order intake down over 15 percent on the prior year, the group said as it reported an 11 percent year-on-year rise in full year trading profits.

The insulation producer warned that with general confidence ebbing and inward investment waning as Brexit approaches, Britain was heading into a more difficult phase.

Its shares were 8.2 percent lower at 34.12 euros by 0810 GMT.

“I think what we’re seeing is a little bit of investor pullback when it comes to construction, it’s quite logical that investors would hang back given the present uncertainty to see which direction things are going,” Kingspan Chief Executive Gene Murtagh had told Reuters in a telephone interview.

“What suffers up front is generally low rise commercial and industrial and that’s where we’ve been feeling it in the insulated panel business. I would expect it to continue for sure, but at what rate it is really difficult to call.”

Kingspan generates around a quarter of its sales in Britain, though that reliance has been falling as it diversified further into other parts of Europe last year and entered the South American market in a record 600 million euro acquisition spree.

That helped drive the 377.5 million euros trading profit, with acquisitions contributing 9 percent to that growth. Of its 10 acquisitions last year, the two largest are also yet to close.

“The business has diversified hugely in the last four or five years and clearly in particular the European dimension and more recently the South American dimension have just added other avenue completely for us that compensate somewhat for the weakness in the UK,” Murtagh said. (Reporting by Padraic Halpin; Editing by Keith Weir)

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