Still cautious SIG to top forecasts

9th Jul 2010 07:21

Insulation materials and specialist construction products maker SIG said underlying profit before tax for the first half of 2010 will be above market expectations.Sales in sterling of around £1,291m were down some 4.0% compared to £1,345m a year earlier, and were around 3.0% lower on a constant currency basis.In general the stabilisation of SIG's various markets has been progressing in line with management's expectation after the disruption caused by bad weather in the early months of the year. The board expects that monthly sales compared to the same month in the prior year will level out in late summer 2010. Combined sales rates for May and June were at, or slightly ahead, of 2009 levels in each of SIG's main reporting regions of the UK & Ireland and Mainland Europe, although volumes in June were a little softer than May. In the main distribution and merchanting businesses in the UK and Western Europe, which account for around 88% of group sales, monthly sales rates by the end of the first half were running slightly ahead of the same period in 2009. This has been driven by residential markets which have been returning to modest growth. Non-residential construction is still moving downwards and is unlikely to return to growth before the end of 2010. Gross margins remain under pressure and is creating a drag on profitability despite improving volumes.Net debt continues to reduce, and stood at £227m at the end of June, down from £255m at the end of 2009, though the performance was boosted by the recognition of around £17m in exchange rate and fair value benefits.Though encouraged by the improving sales trends the board remains "appropriately cautious" about prospects for the rest of the year, with the group's UK insulation installation and interiors manufacturing operations like to continue to face particular challenges in the short term.