Davy Research |
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Saint-Gobain Group
(SGO FP)
Acquires UK rigid board manufacturer
11 June 2012
Flor O'Donoghue
| Closing Price: | 2752c | Rating: | Neutral | 12/09/11 | Previous: | Outperform | 23/04/10 |
FACTS: Saint-Gobain (SGO) announced on Friday (June 8th) the acquisition of Celotex, a privately owned UK manufacturer of rigid board insulation. No consideration was disclosed. Celotex had revenues of £70m in the year to end-August 2011 and reported trading profits of £3m (margin of 4.3%). The deal is subject to approval from the competition authorities.
ANALYSIS: The deal clearly is very small in the overall context of SGO (circa €90m revenues in a group with over €40bn). What is interesting is that the transaction brings SGO more directly into competition with Kingspan – not just geographically but also on product type. SGO's insulation products are mainly stone wool (mineral fibre, main brand is Isover) while Kingspan/Celotex would be non-fibrous insulation. Hence SGO is expanding in insulation in a category in which Kingspan is a specialist. The other operators of note in the UK rigid insulation sector are Irish-owned Xtratherm and Recticel (quoted Belgian business). Kingspan has insulation boards revenues of up to €200m in the UK so it is a much bigger business than Celotex.
DAVY VIEW: There is widespread agreement that insulation is one of the most attractive product categories in the building products sector. The likes of Kingspan and Rockwool are insulation specialists. Not surprisingly given its sheer size, SGO has a much broader business spread, but it is clear that management is very enthusiastic about the insulation category, although it currently is under 15% of group revenues.