Building materials firm SIG warns of ‘challenging’ market conditions

SIG has warned trading conditions will remain ‘challenging’ this year after the construction products supplier reported a slump in profits.

The Sheffield-based company has seen demand badly affected by a slowdown in the residential and commercial new-build market across the UK and Europe.

Both the Bank of England and European Central Bank have hiked interest rates on multiple occasions since the end of 2021 in response to soaring inflation.

Slackening market: SIG has seen demand badly affected across the UK and European Union by a slowdown in the residential and commercial new-build market

SIG’s like-for-like revenues flatlined in the first half of 2023, having jumped by over a fifth during the equivalent period last year, following a fall in margins and abating price tailwinds.

Reported turnover still increased by 5 per cent to £1.42billion thanks to recent takeovers and positive currency fluctuations, but operating profits dived by about a quarter to £30million.

In the UK, performance was up against an impressive prior year comparative result and rising mortgage rates hitting demand in the domestic repair, maintenance and improvements market.

Underlying sales in the country still rose to just over £600million, primarily due to the contribution from Huntingdon-based Miers, which SIG acquired in 2022 for £36.5million.

Revenue growth was much weaker in France, its second-largest territory, partly because of lower consumer spending hurting sales at its specialist roofing business Larivière, while turnover also declined in Poland and Ireland.

SIG anticipates challenges across its markets, along with further price moderation, will endure over the second half of the year.

However, the firm has maintained its guidance for underlying operating profits to be towards the lower end of forecasts as it expects to see ‘greater benefit’ from recent productivity actions.

Gavin Slark, chief executive of SIG, said: ‘While we expect market conditions in the second half to remain difficult, we remain confident the business will grasp the opportunities it has to continue to improve its underlying operational performance.

‘This will, in turn, deliver higher levels of profitability as we drive towards our medium-term margin target of 5 per cent.

‘The group is financially and commercially well placed to drive meaningful shareholder value in the medium and long term.’

Founded in 1957, SIG supplies roofing and insulation materials to customers across six countries and employs more than 7,000 workers. 

SIG shares were 2.1 per cent higher at 29.15p on Tuesday morning but have still dived by around three-quarters since the start of 2020.

This post first appeared on Dailymail.co.uk