Weak construction sector weighs on Steico sales and profits9 August 2023
Wood fibre insulation board giant Steico saw a 58% hit on its EBIT in the first half of 2023, it reported in a trading update.
The company, which also produces LVL and I-joists, said the period was characterised by reserved behaviour by dealers and a further reduction in inventory levels.
This was coupled with intensified competition in the wood-fibre insulation materials segment as well as the generally weak construction sector. Demand recovered in June, however the pace of growth was lower than original expectations.
Steico’s revenues in H1 2023 were down by 20% year-on-year to €190m (H1 2022: €237m). In the case of EBIT a figure of €16m was recorded, which corresponds to a downturn of 58.3% year-on-year (H1 2022: €38m).
Despite the challenging environment, the company’s management continues to believe that demand will recover in the second half of the year. It expects revenues for the year as a whole to be down by 15% year-on-year.
According to Destatis, the German Federal Statistics Office, the number of building permits granted from January to April 2023 in Germany fell by 27.3% compared to the same period of the previous year, while order intake in the main construction sector fell in the first four months of 2023 by 16.9% compared to the period from January to April 2022.
Construction revenue in the first four months of 2023 also decreased by 8.9% compared to the same period of the previous year. This downturn in order intake and construction projects in Germany continues to be driven by high costs for construction materials as well as the tense situation for construction financing.
In the timber construction sector, the carpentry and timber construction industry expects sales growth to be positive in 2023 at 4% as a result of the high order backlog in Germany. Positive signals are also visible with regard to political support: The German Cabinet passed the draft for a timber construction initiative presented by the Federal Minister for Construction Klara Geywitz in June 2023, ensuring the use of timber as a sustainable raw material in the construction sector.
In Germany, revenues in H1 2023 were down by 31.4% to €65.6m compared to the same period of the previous year (€95.7m).
In the UK and Ireland, the third largest market with a 10.5% share, revenues fell to €20m, down by 14.3% on the previous year. The US and Australian markets were more positive.
Wood-fibre insulation products makeup 63% of Steico’s sales, followed by I-joists at 14.2%, LVL and 11.3%.