Shares of SIG plc, the Sheffield-based international building materials supplier, fell more than 10% after it issued a trading update for the three months to September 30, 2023, saying it expects “weaker demand conditions to persist through the rest of the year.”
SIG said group like-for-like revenue for the period was down 2% versus the prior year, and market conditions “remain challenging, with a further softening in demand in September” most notably in new build residential segments across all geographies.
“In light of the weaker short term demand outlook, the board now expects the group to deliver full year underlying operating profit in the range of £50m to £55m,” said the firm.
In its trading summary, SIG said: “Group LFL revenue was down 2% year-on-year in the period, and is down 1% for the nine months to 30 September 2023.
“Sales prices and volumes were lower than expected in the period, with the overall impact of input cost inflation on group revenue growth estimated to have been neutral, and sales volumes 2% down.
“Market conditions remained challenging across all our geographies.
“Whilst the year-on-year volume performance in H2 has improved from H1, as expected due to prior year comparators, the extent of this has been less than anticipated, with a notable softening in demand in September.
“Although this applies to most segments, it has been most marked in new build residential in all markets.
“We believe we are continuing to outperform the markets in which we operate, reflecting the strengthened performance across our branch network over the last two to three years.
“Working capital and capex remain tightly managed across the group.”
In its outlook, SIG said: “We expect weaker demand conditions to persist through the rest of the year, with a negligible impact overall from input price inflation or deflation.
“Our second half profitability is benefitting from ongoing productivity initiatives, including the early impact of already executed restructuring actions that will deliver £4m of annualised benefits.
“These include a streamlining of central costs and a review of certain OpCo cost structures, notably in the UK.
“We also expect a profit of c£3m on one specific property move in France, as previously reported.
“Despite the positive early impact of these initiatives, the lower than anticipated sales mean that the board now expects the group to deliver full year underlying operating profit in the range of £50m to £55m.
“Notwithstanding short-term market weakness, we continue to progress the strategic and operational initiatives which underpin our ambition for the group.
“We remain confident in our ability to further improve our market positions, and to continue to improve our profitability when market conditions recover.”