Kingspan, the building materials group, today issued an interim management statement in advance of its Annual General Meeting which is be held Dublin and confirmed expectations of an appreciable year on year reduction in earnings for 2008.

Kingspan says that across the group, sales revenue has been at a similar level to that achieved in 2007, at constant exchange rates.  Insulated Panels is flat overall, with a 17% decline in the UK and Ireland broadly offset by strong growth in Central & Eastern Europe and other markets.  Insulation Boards have achieved a modest increase, with a drop in the Irish market of 8% offset by continuing growth in Britain and continental Europe.  While Structural Products is flat year on year, Offsite has been weak and is down 15%, reflecting the significant downturn in new residential construction in Ireland.  Environmental sales increased 13% due to acquisitions last year but are broadly flat on a like for like basis, whilst Access Floors is up 20% and remains strong. The effect of exchange rate movements between the US dollar and the euro, and between sterling and the euro, has resulted in a decline in sales revenue of approximately 6%.  

The group says that the geographical mix of sales and the effect of translation of profits due to currency weaknesses have both had an adverse effect on profitability.  In addition raw material costs, primarily steel, are escalating at present and whilst the Group anticipates recovering these inputs, there is likely to be a lag, the impact of which is expected to result in continued margin pressure over the remainder of the year.

Kingspan says its order intake and pipeline activity tend to serve as a reasonable barometer of anticipated demand for up to six months forward.  Orders for Insulated Panels in the UK and Ireland are down around 16% year to date, but are well up in Central & Eastern Europe. The Offsite residential sector order intake is down considerably, by and in large reflecting the drop in new housing starts in Ireland, and Access Floors is up marginally on 2007. The shorter order lead-times in Insulation and Environmental do not provide longer term visibility. 

Overheads have and continue to be reduced throughout the business to reflect the tightening environment. Measures include some plant closures and headcount reductions in the UK and Irish Offsite businesses.  

Kingspan says that it remains confident that the reductions in operating costs and the investment in capital leave it well placed to respond favorably to a future upturn in the economic environment.  In the meantime, however, the board's view of the outlook for 2008 as a whole is unchanged from its statement of 3 March 2008, that an appreciable year on year reduction in earnings is likely for 2008.