Kingspan’s fall in orders suggests broader slowdown in European construction sector

According to stock market analysts, a sharp slowdown in future orders at building materials company Kingspan points to a slowdown in the construction sector and a possible recession.

The Cavan-based insulation manufacturer, which is a pioneer for the construction industry, issued a trade statement Monday noting a sharp reversal in demand for its products in most of its markets over the past two months.

While Kingspan expects record earnings for the first half of 2022, investors focused on dovish forward guidance and dumped stocks across the sector.

Kingspan’s shares fell 11 percent but its peers did not escape a whiplash, with rivals Rockwool and St Gobain both falling 5 percent as analysts warned the company’s refresh would feed a growing recessionary narrative.

“As markets eye a possible recession in 2023, we expect Kingspan’s comments on demand to be taken negatively by the market overall, although there is no real impact on consensus estimates for 2022,” Exane analysts said in a research note.

The French broker puts Kingspan’s orders down in double digits despite a buoyant business book that rose 19 percent year-on-year in March.

Noting the “sharp deterioration,” Morgan Stanley stressed that no single market or region was driving the slowdown, suggesting the fall in orders was happening across the board.

“Interesting to note that we think this is the first major company to point to a notable slowdown in demand for European building materials,” the investment bank said in a statement.

Three quarters of Kingspan’s business is based in Europe, with most of the rest being based in America. The UK and Ireland are estimated to account for around 15 per cent of total sales, although Ireland is making a diminishing contribution as the company expands internationally.

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

Goodbody analyst David O’Brien said that while investors in the sector are now focused on short-term trends, Kingspan is positioned to outperform its peers. Kingspan’s fall in orders suggests broader slowdown in European construction sector

Fry Electronics Team

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