Shares in insulation and building materials supplier Kingspan (KGP) shook off early losses and were trading slightly higher at €102 by mid-morning as investors chose to overlook news that orders for its signature insulated panels had dropped in the last few months.
In a trading statement for the period to September, the Dublin-based building materials firm - a big favourite with ESG investors - reported that insulated panel sales increased by 43% in the third quarter on an underlying basis, but noted order intake in August and September was lower than in the same period last year ‘and this trend has continued in the weeks since’.
STRANGE TIMES
It was in August that the firm posted a sharp jump in first half revenues thanks to what it admitted was ‘an extraordinary period during which we have experienced unprecedented demand’.
It also observed at the time that it was facing increasingly tough supply constraints and ‘an inflationary curve never experienced before’.
In its latest update, the firm described raw material inflation as ‘extraordinary’ and admitted that most of its top line growth in insulation boards, another big seller, was mainly the result of passing on big price increases to its customers.
The full year outlook was also cautious, with the company saying that while its order backlog remained strong it was ‘reducing week on week as sales activity outpaces new order placement’.
CRUCIAL FOURTH QUARTER
The firm blamed earlier than normal order placement in the first half of the year by customers who wanted to secure supplies ahead of price rises, leading to a 10% year on year drop in panel orders in the third quarter.
Meanwhile, raw material prices have been ‘somewhat stable in recent weeks albeit at record high levels and following a period of unparalleled increases’. The company said it was ‘acutely conscious’ that should prices fall materially, the impact on its results would be negative.
A great deal therefore hangs on the seasonally important final quarter of the year, although the firm reiterated its full year trading profit guidance of around €750 million compared with €329 million in the first half and €520 million last year.
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