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M&A Troubles

May 1, 2023

Insulation specialist Recticel thunders 24 percent lower on stock market

04/28/2023 | 05:41am EDT

Copyright BusinessAMBE

Investors dumped Recticel shares after disappointing quarterly results and uncertainty over the sale of its Engineered Foam division to U.S.-based Carpenter.

In the news: Recticel anticipates a significant decline in its operating cash flow (ebitda) in 2023, with the market environment remaining volatile. The company reported this with the release of its quarterly results.

  • Demand in the first quarter remained well below last year in almost all product segments. “The market is expected to remain volatile with little near-term visibility,” Recticel stated.
  • In the first quarter of 2023, the European construction market remained very challenging due to high inflation and interest rates, according to the company. “Declining disposable income, coupled with expensive building materials, has further weakened the market.”
  • Kepler Cheuvreux analysts expected volumes to decline only from the second quarter onward, with the pace of decline increasing in the second quarter. “But it is clear that the market weakness has come earlier than expected,” Kepler said.
  • Kepler also expects pressure on margins, as insulation specialists usually cut prices to maintain volumes. On the other hand, raw material prices remain relatively high.

Even more uncertainty: Analysts also point to uncertainty surrounding the sale of Engineered Foam to Carpenter.

  • The American candidate acquirer wants a substantial discount from the original price of 656 million euros, due to recent market developments, which Kepler says calls into question the deal, as the price paid was reasonable.
  • Recticel says it is still considering all options.

Stock market reaction: On the Brussels Stock Exchange, s share price closed Thursday at 15.92 euros. That went down to some 12 euro, or almost a quarter less, in an initial reaction this morning.

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