SIG, Europe’s largest supplier of insulation products, lost almost a fifth of its market value yesterday after giving warning that this year’s profits will be at the bottom end of City forecasts.
The shares, which were changing hands at 175p each last month, plunged almost 22 per cent to 90p on the news, a month after SIG warned that cold weather on the Continent had hit demand as fewer new buildings were constructed. That wiped £34 million off its market value. The company, previously known as Sheffield Insulation Group, was expected by analysts to report between £63 million and £99 million in underlying pre-tax profits for the year to the end of December. However, because of what it described as “continuing difficult market conditions”, SIG said profits would be at the bottom of this range. It added that pricing pressures and extremely cold weather conditions in the first three months of the year, particularly in mainland Europe, had hit sales. SIG said: “Across all businesses in the UK, volumes remain subdued, while pricing pressures and a move towards a more unfavourable product mix are holding back performance, with the UK interiors business particularly affected. European markets have not achieved the usual level of seasonal improvement in the last four weeks.” The company, which has already announced almost 1,200 job cuts this years — including 645 in the UK — and plans to close 80 branches across Europe, said it was continuing to try to reduce its cost base. It said it had made more cost savings worth £8million during the past four weeks, adding: “Further measures have been prepared for implementation imminently.” Adrian Scott, of Cazenove, the broker, said that he now expected SIG’s underlying pre-tax profits this year to be only £60.4 million and also chopped his estimate for the firm’s 2010 earnings by 36 per cent. He said: “These are large reductions, although some estimate risk remains, partly due to possible further gross margin pressure.” SIG tapped shareholders for £320 million in April by issuing new shares at 75p each. All of the proceeds were used to reduce the company’s debts, which stood, before the cash call, at £697.1 million. Other suppliers to the construction industry have also raised money to bolster their balance sheets this year, most notably Wolseley, the owner of the Plumb Center builder’s merchants chain. -- Posted By anjos to Business Blog at 6/18/2009 11:37:00 PM [Non-text portions of this message have been removed]
