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Saturday, December 03, 2022

Fall in Kingspan orders point to a broader slowdown in the European construction sector

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According to stock market analysts, a sharp slowdown in future orders from construction materials firm Kingspan points to a cold and possible slowdown in the construction sector.

The Cavan-based insulation maker, which is a Belvedere for the building industry, issued a business statement on Monday that saw a significant reversal in demand for its products in most of its markets over the past two months.

While Kingspan is expecting record profits for the first half of 2022, investors focused on downbeat forward guidance and dumping stocks across the sector.

Kingspan’s stock is down 11 per cent, but its rivals Rockwool and St. Gobain’s are both down 5 per cent, as the company’s update will fuel a growing bearish story.

“With markets eyeing a potential recession in 2023, we expect Kingspan’s comments on demand to reflect overall demand, with no real impact on consensus projections for 2022,” analysts at Axen said in a research note. will be taken negatively by the market.”

The French stockbroker estimated that the forward business book jumped 19 per cent in March over the previous year, despite the decline in orders for Kingspan being in the double-digit range.

Morgan Stanley noted the “strong decline” and highlighted that no market or sector was driving bearish, indicating that a decline in orders was occurring on a broader basis.

“It is interesting to note that we believe this is the first major company to uncover a significant slowdown in demand in European building materials,” the investment bank said in a note.

Kingspan has three-quarters of its business in Europe, with the rest coming from the US. The UK and Ireland are estimated to account for about 15 per cent of total revenue, although Ireland’s contribution has been declining as the company has expanded internationally.

The company’s shares had already fallen 35 percent since the start of the year as the market feared bad news.

Goodbody analyst David O’Brien said that although investors in this area were now focusing on short-term trends, Kingspan was positioned to outperform its peers.

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