Insulation maker Kingspan reluctant to cut prices just yet

DUBLIN (Reuters) – Building insulation specialist Kingspan said it plans to maintain higher sales prices for the time being in order to protect itself from any further surprise rises in raw material costs, even if it means a continued decline in sale volumes.

The Irish firm, which on Friday reported a 32% rise in first half trading profit after revenue topped 4 billion euros, had warned recently that order intake volumes had fallen significantly year on year in May and June.

Chief Financial Officer Geoff Doherty told an analyst call that volumes were down around 5% to 10% in July and August but that he expected underlying revenue to rise by 10% in the second half due to prices being higher than a year ago.

Shares in the group, which fell sharply in June when it warned of the dip in orders, were 8.4% higher at 62.3 euros by 1000 GMT. Goodbody Stockbrokers analyst David O’Brien said the tone around orderbooks on Friday was “incrementally comforting”.

While inflation in two of Kingspan’s three key raw materials – steel and chemicals – has eased in recent months, CEO Gene Murtagh said the level of unpredictability meant it could not yet pass the lower costs on as it always has in the past.

“Materials could go way down, materials could turn and go way up and actually I haven’t got a clue what the outturn is going to be. It could be either,” Murtagh told analysts.

“The easiest thing in the world is to drop the price and pick up the volume. We’re running a very conscious strategy of protecting price and margin in the face of unpredictability.”

Kingspan, which has 198 manufacturing sites in more than 70 countries around the world, said the building industry is likely to contract in many parts of the world in the near term but that it was confident in the long-term demand for its energy efficient products.

(Reporting by Padraic Halpin; Editing by Kirsten Donovan)