Building materials company SIG warns of ‘challenging’ market conditions
Building materials company SIG warns of ‘challenging’ market conditions
- The Sheffield-based company saw LFL revenues remain flat in the first half of 2023
- SIG has seen demand in the UK and the European Union badly affected
- A slowdown is hitting the residential and commercial new construction market
SIG has warned that trading conditions will remain ‘challenging’ this year after the construction products supplier reported a slump in profits.
The Sheffield-based company has had demand hit hard by a slowdown in the residential and commercial new build market in the UK and Europe.
Both the Bank of England and the European Central Bank have raised interest rates several times since late 2021 in response to skyrocketing inflation.
Market slackening: SIG sees UK and European Union demand hit hard by a slowdown in the residential and commercial new build market
SIG’s like-for-like revenues flattened out in the first half of 2023, after rising more than a fifth in the same period last year, following margin declines and diminishing price winds.
Reported sales were still up 5 percent to £1.42 billion thanks to recent acquisitions and positive currency movements, but operating profit fell by about a quarter to £30 million.
In the UK, results outperformed last year’s impressive comparative performance and rising mortgage rates depressed demand in the home repair, maintenance and home improvement market.
Underlying sales in the country still rose to just over £600m, thanks mainly to the contribution of Huntingdon-based Miers, which SIG acquired in 2022 for £36.5m.
In France, the second largest territory, sales growth was much weaker, partly because lower consumer spending negatively affected sales at specialist roofing company Larivière, while sales also fell in Poland and Ireland.
SIG expects the challenges in its markets, along with further price moderation, to continue in the second half of the year.
However, the company maintains its expectation that underlying corporate earnings will be at the lower end of the forecasts as it expects to see “greater benefits” from recent productivity actions.
Gavin Slark, chief executive of SIG, said: ‘While we expect market conditions to remain challenging in the second half, we remain confident that the company will seize the opportunities it has to continue to improve its underlying operating performance.
This, in turn, will drive higher levels of profitability as we approach our medium-term margin target of 5 percent.
‘The group is financially and commercially well placed to create meaningful shareholder value in the medium and long term.’
Founded in 1957, SIG supplies roofing and insulation materials to customers in six countries and employs more than 7,000 people.
SIG shares were 2.1 percent higher at 11:15 a.m. Tuesday morning, but are still down about three-quarters since the start of 2020.