Call Start: 05:30 January 1, 0000 6:22 AM ET
Kingspan Group plc. (OTCPK:KGSPF)
Q4 2016 Earnings Conference Call
February 17, 2017, 05:30 ET
Gene Murtagh - CEO
Geoff Doherty - CFO
Robert Eason - Goodbody Stockbrokers
Yves Bromehead - Exane BNP Paribas
Gregor Kuglitsch - UBS
Andy Murphy - Bank of America Merrill Lynch
Florence O'Donoghue - Davy
Lush Mahendrarajah - Berenberg
Gerard Moore - Investec
Welcome to today's Kingspan Full Year Results 2016 Call. Throughout this all participants will be in listen only mode. And afterwards there will be a question and answer session. And just to remind you this call is being recorded. And today I'm very pleased to pass you over to Gene Murtagh, CEO and Geoff Doherty, CFO. Gentlemen, please begin.
Thank you and good morning everybody, welcome to the call for our full year results of 2016. We'll get straight into it on page 9 of the presentation titled 2016 in Summary. Glad to be reporting really an exceptionally strong performance for the business in 2016. Our revenue up 12% to €3.1 billion and trading profit up 33% just under €341 million. And that of course despite very significant currency headwinds that we had in the year, particularly sterling -- sterling/euro related.
In essence the UK, despite June 23 vote et cetera, was particularly strong for us and that carried through also into the second half of the year. And if anything actually accelerated in the second half of the year. Western Europe has seen a significant recovery, particularly in the Netherlands and more latterly in France. Which really is a kind of a stand out market for us at the moment. And we'll come to that later on.
And then in the U.S. as reported previously, it was a little bit weaker in the autumn season which is not unusual in an election year. But again I'd say we're back to relative normality in the early part of 2017. So the insulated panels business as I say in the UK was particularly strong. Germany we should just note was a little bit flatter than other parts of Western Europe and that's a pattern that's continued into the early part of 2017. Difficult to judge at the moment, clearly it being winter et cetera and it was a particularly strong winter in parts of central and in Eastern Europe as well. But in essence overall a positive start in the insulated panels businesses.
The boards business had another strong year. Again the UK particularly strong, as indeed was the U.S.. And strong recovery in our insulation businesses that are based in the Netherlands, Germany and now more recently in the Nordics. So we've seen growth in virtually all markets in the insulation board business during 2016. And again that's something we expect to build upon this year. Environmental has continued its profit recovery. Margins up to 7% which is a significant improvement on what was virtually a break-even business just a couple of years ago. And again we would expect to build upon this. That clearly was enhanced by the acquisition of the Australian Tankworks business earlier in the year and that particular side of the business has been performing very well.
Our access floors business remains reasonably tough in North America in the office construction sector. Although the data sector which has been very supportive to the business over the last number of years, again was robust. And the product suite that we have rolled out into that area has been a significant contributor to the performance of the business in North America in recent years. And indeed beyond that now in the data market.
In Europe the UK in particular has been strong. Again that's continued into early 2017. But as we've outlined before, despite the issues in the UK we would expect in a normal period for that cycle to be tapering off late this year, early into 2018 in any event. And then overall in the year and Geoff will put lots of color on this later. We invested a total of just under €365 million, €250 million of which was in acquisitions. Which we'll talk about later. And a gross CapEx figure of €113 million which is significantly expansion related. About half -- about €50 million of that would have been maintenance CapEx.
So with that I'll just hand you over to Geoff and we'll talk about the business units sometime later on.
Thank you, Gene. I'm just on page 10 or slide 10 on the financial highlights. And just before I get into some of the numbers. We make reference in one or two places to constant currency. And the principle reason for that is the euro/sterling exchange rate went from 72.5p to €1 in 2015 to 82p in 2016. So starting from the top, Group revenue a little over €3.1 billion, up 12% in actual terms year-on-year or 16% constant currency. Trading profit at €340.9 million was up 33% overall or 41% on a constant currency basis.
Group EBITDA €404.1 million, up 28% overall. The Group earnings per share €1.438 up 35%. So pretty much all of the trading profit translating through to earnings per share growth. We've declared a final dividend of €0.235, bringing the total dividend for the year at €0.335. So up 34% on the previous year. Free cash flow of €206.6 million versus €267 million the previous year. And one of the features of free cash flow on the year was the level of capital expenditure in terms of investing in the future growth of the business. And we'll come to some of that later.
Net debt overall at the end of December was €427.9 million, up approximately €100 million on the previous year. But as Gene referred to, we embarked on €364 million of capital investment in the year between acquisitions and capital expenditure. Trading margin grew by 180 basis points year-on-year. So 2016 was 11%. Net debt to EBITDA 1.06 times. So pretty much in line with the prior year despite the significant investment during the year. And we continue to build returns on capital employed. So return on capital employed, 17.3%, up 210 basis points on the 2015 metric.
Turning to page 11, one of the features of performance -- or a key feature of performance indeed of 2016, was the margin performance. And you'll see by division, each division grew its trading margin year-on-year over 2015. So insulated panels 11% in 2016 versus 9.3% in 2015. Insulation boards at 11.4% compared to 9.2%. Environmental 7% versus 5.1% in 2015. And raised floors 12.5% versus 12.1%. So every division playing a part in that. And then you'll see the trajectory of trading profit on the left hand side over the last five years.
Turning to page 12. We have set out a bridge of the sales and trading profit performance year-on-year in terms of the constituents of it. So dealing with sales. Firstly you'll see that currency clipped €116 million or minus 4% off year-on-year revenue, principally sterling related. Acquisitions delivered 11% to sales growth. And underlying sales grew by 5%. So the total sales growth for the year was 12%. And on trading profit on the right hand side, in overall terms it grew by 33%. Currency was minus 8%, acquisitions plus 7% and underlying was up 34%. Really reflective of both a bit of volume growth but also the margin performance year-on-year.
Moving to page 13 which deals with free cash flow. To set out the components of that, I'm bridging from EBITDA to free cash flow. EBITDA was €404 million. Working capital increased by €53 million. And it's worth highlighting that the position that we came from in 2015, working capital levels were untypically low in December 2015 at 10.9%. So pretty much working capital has returned to its five year average of a little over 12%. And clearly the sales growth as well year-on-year would have meant that working capital increased as a consequence of that. Then in terms of other items, the interest number was €14 million, taxation payments €50 million and net capital expenditure of €103 million. Of that, €50 million approximately of that capital expenditure was maintenance. With the balance of it being developmental expansionary CapEx.
So all of that led to a free cash flow performance of €206.6 million in the year. Page 14 just emphasizes the point around working capital where at 2016 at 12.3%, it's pretty much in line with the five year average. So you will see that 2015 was an outlier in terms of the opening position. Page 15 to deal with the movement in debt year-on-year. We started the year with €328 million of debt. We generated free cash from operations of €206 million. We invested €254 million on acquisitions. We paid the cash dividend of €48.4 million. And landed at €427.9 million at the end of December 2016.
Page 16 sets out the trajectory in returns on capital over the last number of years. So despite the capital deployment over the last number of years, we continue to build returns and you'll see that 17.3% was the 2016 metric. Growing from 15.2% in 2015. Page 17 just emphasizes the strength of the Group's balance sheets. And a couple of highlights in that regard. In November we completed a €250 million U.S. Private Placement with a weighted average term of nine years and a fixed coupon of 1.49%. The completion of that meant that cumulatively we have raised €450 million over the last two years at an average fixed coupon of 1.74% for eight year or nine year money. The combination of our available cash balances and committed undrawn facilities is a little over €680 million. And the weighted average maturity of our debt facilities is 6.5 years.
On page 18 we just make the comparison of our sales by key geography. So you'll see that the UK comprised in 2016 -- comprised 27% of the Group compared to 30% in 2015. Ireland at 4% versus 3% a year ago. Mainland Europe 41% in 2016 versus 39% in 2015. The Americas in line at 20% of the Group and rest of world 8% in both cases. So with that, I'll hand back to Gene.
Thank you, Geoff. We're on page 19 titled Insulated Panels. Our largest division by a significant stretch, representing 67% of revenue. That includes light and air at about 2% of total Group sales which we'll come to shortly. Underlying growth of 5% in the year and obviously well enhanced by the acquisitions we did. Particularly Eurobond and late in the year Paroc in Finland, adding 15% to the revenue there. As we mentioned earlier Netherlands and France strong recovery. Germany by comparison a little bit flatter. And again I would say both of those trends have continued into the early part of this year.
With a strong performance across Central Europe as well this is an area that's reasonably difficult at the moment. And not at an underlying level but largely owing to a particularly harsh winter in parts of Central and Eastern Europe which has left it difficult to get going there. But the order book and the order intake has been encouraging I would say in the first -- in the early weeks of this year as well. But dispatch is clearly challenged by snow and frost. The UK, a strong finish to the year both in terms of dispatches and order intake and order book. Which leaves us in a reasonable position from an activity perspective in the early part of this year. And that clearly is a key market for us not just in Europe but worldwide.
Ireland continued its recovery. That's continuing into this year as well and strong progress in Australasia which had a reasonably difficult 2015, recovered well in 2016 and again that's something I believe we'll build upon this year as well. In North America, turning to page 20, there's been considerable penetration growth in the year. It's at about 12% now, that if you recall was about 5% in 2005. So we've had a combination of improvements in general building activity plus obviously the additional factor of conversion from built up systems and concrete tilt-up in that market which I expect continues fairly indefinitely in North America.
We've begun production in our facility in Monterrey in Mexico and that clearly is an area that's going to get considerable focus this year. And indeed we'll be looking at further expanding our business into Central and South America using that initially as a base. But it's a first step into this region, a little like the Czech Republic was probably 15 years ago in Central and Eastern Europe. So we expect it to lead to an exciting business there over the longer term.
The light and air division. Okay, so we've -- we had an existing business based out of Ireland and the UK. Therefore we were producing polycarbonate and GRP materials for daylighting. We've built upon that through a couple of acquisitions during the year. And that leaves us with a run rate revenue of at least €190 million for the current year. And that business has been going according to plan. It's seasonally quite a second half business just by the nature of it. Yes and all in all it's looking like an exciting division for us going forward.
As we've outlined before we have ambitions for this business globally and we expect to -- through a combination of both organic growth and further acquisitions to build this into a much more substantial part of Kingspan. So that will be factored out separately from this year and we'll be able to see how it performs outside of insulated panels. Quadcore which has been a key development for us over recent years has been rolled out to over 30% of our facilities in insulated panels. The key thing clearly is trying to make this product available first of all. And then the second aspect is where we build specifications for these products which ultimately lead to sales.
So it's available in about a third of our facilities. In the first year it was just about 1% of our volume worldwide. Which is quite typical as we start off. We'd expect that figure to be approximately 5% this year and then building up on that at an accelerated level into 2018 and beyond. So that's a very unique and very important part of our technical offering in our insulated panels business as we go forward.
On page 21, the insulation boards business grew at a very healthy 7% underlying. That was largely driven by the UK, North America and recovery in Western Europe. And then more recently we've established a position in the Nordics producing in Finland. And that business is supplying obviously the Nordics' markets and is also supplying to some extent into the Baltics and even into Russia. So that's an exciting frontier for us. Not just in insulation but in panels where we're building a greenfield facility alongside that business -- Quadcore facility alongside the board plant in Finland. Which is -- probably it's a very substantial investment and a real statement as to what our intent is in terms of converting the Nordics markets towards modern materials and modern methods of construction.
Beyond that, the U.S. as we've said before has kind of -- it's effectively operating at capacity until the new plant comes into play there. Which is going to happen probably in the second quarter of this year. It's well under construction and that will effectively double our capacity for XPS insulation board out of our Winchester facility. As I say, that's coming on stream second half. And then concurrent to that we're clearly building the front end of our business to be able to generate demand for Kooltherm products in particular. And hopefully be able to build that business to a point where we'll invest more substantially in capital there over the next two years to three years in Kooltherm.
We're also in the process of just starting up our facility in Melbourne. So that's been a very substantial investment there. We've over the last five years or six years been building a position by exporting materials from Europe. That clearly was unsustainable just from a customer service perspective. And we've started up literally now producing saleable product in Melbourne as of the first quarter. And again we would expect that to provide a significant impetus into our revenue growth in that general Australasian region as we go forward.
On access floors. The business grew at an underlying 10% largely driven by growth in the UK office market. But also supported by the data opportunity that's run out of our American business. We would expect that pattern to be relatively similar in the year as we go ahead. And then tapering off somewhat in the UK as office construction hits its expected cyclical downturn. Probably later this year and into 2018. From a data center offering perspective, again I think this is something that we've pretty much perfected in North America and are beginning to roll out more substantially across other parts of the world. And that should provide a platform for at least stability in this business against a declining office market and ultimately growth into that relatively buoyant sector.
And then finally on environmental. That's a business that obviously has been in recovery mode for the last number of years. It was broadly flat at an organic level. Then acquisitions -- namely the Tankworks business in Australia -- added 13% to revenue in the period. And a significant improvement in margin from 5% to 7%. And again I think that's a margin level that we can build upon again this year and into the future. So I'd say relatively stable underlying performance is what we can expect from that business. And then growing more substantially into Australasia and we're at the early stages of considering some moves into North America as well for this business. Then on page 24 we've got the outlook. In summary the general order books around the business entered this year in a fairly solid position. I would say particularly North America and the UK, particularly solid. So -- and so far as we can judge we would expect the early part of this year to be quite strong from an activity perspective.
One of the key tasks we have at the moment naturally is to deal with what's been a fairly highly pressurized input environment. We've seen both steel and chemicals -- which are naturally our two key inputs -- increase significantly through the fourth quarter and again into this quarter. And in fact some of them are likely to continue to increase into the second quarter of this year. So it's going to be a fairly constant process of driving that recovery effort into the market. And that's something that's ongoing and if the past is anything to judge by we expect clearly to recover this in total as we go through the year. It's -- by the nature of our business we will experience some lag in relation to this. We generally have an order book of around three months. So that clearly has to be honored at whatever the prices were we agreed in the past for those. And then naturally as we price going forward we end up recovering that. But as I say broadly about a three month lag.
It's been five years or six years since we've seen any kind of real inflation in our cost base. So this is something we're underway with now in 2017. I'll just turn you all to page 27 which is titled Global Organic Expansion. This is an area that we've been obviously focusing hugely on over the last couple of years. We've talked about Melbourne which is underway, Dubai is just about to start commissioning. We've completed considerable work in Belgium, both in Leuze at our door facility and Joris Ide had a plant upgrade during the year. We're about to commission a Quadcore insulated panel line as I said in Finland. And we've started production in Monterrey in Mexico with a PIR panel to start with and moving that towards Quadcore as we go into this year. And then in the second quarter of this year the Winchester facility for insulation in North America will get into production.
So there's been significant headway made on those fronts and still a couple of those facilities to be finished off or indeed started up. Russia namely and Modesto in California are areas that we'll be working towards late this year, into next year and beyond. So there's been probably an unprecedented level of plant expansion for us at Kingspan but it's all gone very smoothly so far. And then last but not least, I know it's not an area that many of you will focus on. But on page 31 we've been on a path towards achieving Net Zero internally over the last five years or so. We've set about trying to achieve 100% by 2020 with an interim target of 50% by 2016. We've achieved 57% which I think is a fair credit to all within who have been working on this.
It's key to us both internally and indeed externally in terms of what we provide and what support we offer for people to achieve this. And again this year we'd expect that number to be well into the 60s. So making progress on that front as well. So that essentially finishes off our formal presentation and now we're happy to take questions.
[Operator Instructions]. Our first line is over to the line of Robert Eason at Goodbody, please go ahead.
Hi, just got three areas of questioning. The first one -- like you've already alluded to, the underlying cost inflation that you're facing in your raw materials as is the whole sector in 2017. Can you just give us a bit more color in terms of rough quantum size that we're talking about here and roughly the degree of price increases you will need to incorporate into your end product? That's my first question.
Second one, maybe just a bit more detail about the UK. You talk about the order book being comfortably ahead. When you look at your quotation book and then even further out into your pipeline, how does it look? Are there any sectors that have shown any weakness at all or what would you point out into that further-out pipeline that you monitor very closely internally?
And my third question is around M&A. You clearly outline the strength of the balance sheet and the extent of our new facilities, so what is the pipeline looking like for 2017, especially on the back of two very active years for the Company?
Okay, Robert. On the inflation front, we -- the raw materials that are affected by this are slightly in excess of €1 billion. So that's the combination of our steel and chemicals. And we -- obviously this is commercially sensitive. We're negotiating both with suppliers and indeed with customers simultaneously, so it's a little bit tricky to get into the absolute [indiscernible] here. But in essence, we're looking at something around €100 million of recovery need as things stand.
Actually that figure may grow as we go through the second quarter which I alluded to earlier. But in essence, it's in the order of €100 million that we need to recover globally as things stands, bearing in mind that we -- also, we're undergoing some inflation during the fourth quarter. So this is obviously a step up from that again.
In terms of what price increases that will lead to, I think maybe just work that out. But it's -- we're dealing -- it varies by product and varies by geography because naturally our materials are moving at different rates in different places. But I don't really want to get into price increase negotiations here on the call.
Yes. No, that's good detail. Thank you.
On the overall pipeline in the UK, the only area that's been evidently weak as we look forward is office. Is that anything to do with June 23? Very hard to call that, Robert. As I was saying earlier, we would have anticipated, in any event, late 2017/2018, a cyclical downturn in office, if the past trends have been anything to go by.
But as for the rest, the pipeline is pretty much intact. Some movements I would say in terms of timing, maybe short term things looking reasonably positive. But overall, I would have little concern as things stand in the UK.
And then on the pipeline of acquisitions, we have in excess of €600 million of headroom. We obviously have an internal cap of around 2 times debt to EBITDA which would imply our ability to invest probably up to that €500 million or €600 million in the current year and still stay within that. There's a healthy pipeline of opportunity, but it again -- we seek value at Kingspan and we're not just going to buy for buy's sake. I think price sensitivity is more the issue here than ultimate opportunity, but we'll continue to try and make progress on a number of fronts.
Okay. Now we go over to Yves Bromehead at Exane. Please go ahead, Sir. Your line is open.
Just a few questions on my side, again on the cost and pricing. Could you remind us the split between the bill of steel and chemicals? And when you imply €100 million of cost inflation that actually seems a bit weak given the current development of steel prices. Could you give us a bit of more color on that and how you're able to sustain quite a low level of inflation on that side? I guess are you able also to give us some sense of what price increases you need to pass on in panels across the Group and in boards?
And then my second question would be on the competitive environment, especially in Continental Europe where we see quite a strong competitive environment actually and some new capacity coming on stream. Are you still available -- sorry, are you still comfortable in your ability to pass on cost inflation in this environment?
The last question would be again on M&A. When I look at your recent acquisitions, so Eurobond, Paroc which were mainly in mineral wool panels, do you see a structural change in the industry towards mineral wool? And then looking forward, given the recent appreciation of the Brazilian real and ruble, would it still make sense for Kingspan to enter those markets?
Right. Lots of stuff there. In terms of the inflation side, broadly, it's 70/30 is the way you can take steel chemicals in terms of the -- as a split of the billion out of inputs. You say there that what we're -- the inflation we're experiencing is probably a little less than you've seen. You have to bear in mind we've been seeing this progressively through the fourth quarter of last year as well, Yves. And additionally, we don't buy raw steel, so the percentage increase you might be looking at for raw steel obviously is far more substantial. We've -- the product gets reduced, it gets galvanized, it gets pre-painted. And all the way along that's ultimately diluting the level of increase that we're experiencing. So that may go in part to your question there.
In terms of the competitive environment in Western Europe, yes, we agree, there's been reasonable additional capacity added to the market in recent times. I think if you look at the general overcapacity of the basic product offering in Western Europe, it's well oversupplied for many, many years. And if that's increased by 4% or 5%, to be quite honest, I don't think that significantly moves the competitive dial for us in Western Europe.
The increases that we're experiencing are obviously industry wide and coming from an industry that -- obviously, we've reasonably healthy returns, but by and large, I would say the returns from the industry are not particularly spectacular. So when you've got this level of cost inflation I don't think there's an option for anybody other than to pass it on. But I agree, it's -- the additional capacity clearly does create a pressure point for us, but I don't think there's any hiding place such as the pace and the extent of the increases.
We did acquire the Paroc Panels business, as you say and that is in no way to be read as a sense that we feel there's a structural change towards fiber. In fact it's quite the opposite. First of all, the product is, in some markets, necessary on certain elevations of a building that might have exceptionally high fire requirements, so it just enables us to supply the complete package.
But as an overall, we would see and have been absolutely at the center of driving a trend away from fiber. And I suppose in essence, being in control of those assets is beneficial to that longer term process as well. So no, it's not recognizing a trend or a shift back to fiber at all. Quite the opposite.
Okay. And just in terms of the M&A pipeline considering the appreciation of the Brazilian real and the ruble, I know that you are looking at entering those two markets. Does that create pressure for you now to get into those markets?
No. I wouldn't say short term movements in currency will bend or sway us one way or the other. I think they're two long term opportunities and we continue to work on them.
We're now over to the line of Gregor Kuglitsch at UBS. Please go ahead.
Can you give us an update on the innovation side of things? You didn't put too much emphasis on it today and where we're in Kooltherm, Quadcore, if there's anything else coming in 2017 that we should be aware of in terms of new product launches? First question.
Second question is, can you just remind us the overall capacity addition that you outlined on slide 27, what that actually means for the Group and how much growth you think that contributes this year and next in terms of topline?
And then maybe could you give us some detail on light and air? Obviously it's a new division so we all don't know it fully well. Could you give us a sense, exposure, margin profile and what the aspiration is perhaps as that business matures? Is this a below-10%-margin business or does it more proximate the Group? I just want to get a sense of the economics of that particular business line. Thank you.
Yes. Okay, Gregor. Good morning. Yes, in terms of Quadcore and Kooltherm, the primary challenge that we have at the moment clearly is -- or task rather than challenge, is just physically rolling out the Quadcore capacity across the Group which is well underway. We've, as I said, just over 30% of facilities converted and over the next two years we'd expect to have virtually all or all meaningful facilities converted to it.
In terms of the process of moving the market towards it, it's clearly miniscule presently. We have to develop specifications for it. But about 1% in the year gone by and 5% in the current year would be our target. And ultimately, we'd expect to be at around 25% within five years across the Group. So not unlike the profile of Kooltherm within insulation is what our target is.
So yes, technically, it's an extremely robust product, testing out extremely well. And obviously from a market penetration specification perspective, the interest is extremely encouraging and the shift towards that.
In terms of Kooltherm, we have moved to what we call the 100 series which is effectively the second generation of Kooltherm. And that's largely around a significant improvement in thermal performance, so just landed improvements in Kooltherm. That was launched in the fourth quarter of last year. And again, we'd expect to see a significant move towards that away from, if you like, the regular Kooltherm product that we've been growing over the last number of years. So that's exciting.
And concurrently, we're also in the process of developing the next generation of industrial pipe insulation which is also Kooltherm based. And that's something we'd expect to bring into the market probably by the fourth quarter of this year. And again, that'll be a significant leg-up in terms of product performance within a sector that's largely dominated by mineral fiber actually worldwide.
From the capacity question you asked, when all of these facilities come on stream the implied capacity expansion is about €300 million in revenue. Obviously that takes a number of years to fill. It's not -- you don't just turn it on and fill it. But that's the implied revenue expansion related to all of those.
Light and air then, yes, it'll be just a sub €200 million division, assuming no further acquisitions in the current year. The margin profile, early days, will be lower than Group average, probably at around 7% -- and clearly that's something we'd expect to grow to Group average over the next two years to three years. And we don't see any reason why that can't be achieved.
One thing to bear in mind in this business, as we said earlier, is it's significantly a second-half business just in terms of the profile, the margin profile of the business. So it makes little money -- little or nothing in the first half and delivers very strong in the second half, as we also experienced ourselves. So just the profile of profit delivery is slightly different than the rest of our businesses.
We're now over to the line of Andy Murphy at Bank of America, Merrill Lynch. Please go ahead.
Morning, everybody. Gregor just asked part of one of my questions, but the other part of it was just in terms of Central and South America. Could you give us a bit of a feel for the scope that you see there in terms of revenue over the next -- what that might build to over five years? Second question was on CapEx. Could you just give us a steer for where that's likely to land for 2017 and 2018? And then just a final relatively simple question was on the geographical breakdown within Europe, the 40%. Can you just give us an update on the major markets there and what they break down to and also for North America?
Okay. In terms of South America, it's really embryonic days for us. We have no presence there and we'll begin to try and supply Central and South from a Mexican base to start with. And that's also a business that we expect to be sending product northwards into Texas, et cetera. The opportunity down there is -- so for now there are probably two to three significant players dotted across the whole continent. And as always, our ambition would be to try and acquire a position and then Kingspanize that business as rapidly as we can. So that's clearly our focus and has been as we've been researching that market for the last five years or six years.
The level of product offering clearly is below what we have in other markets, so fairly basic industrial, commercial and cold-storage applications. But our attraction to those markets ultimately is a move towards more energy-efficient construction. There's clearly an infrastructural -- a whole infrastructural opportunity around retail development and obviously food production in South America which is very substantial. So the general opportunity there is absolutely ripe for Kingspan to enter the market. But again, we just have to take it in our stride in terms of size of exposure that we're prepared to take there. And the CapEx? CapEx?
CapEx for 2017 Andy, approximately €100 million. And for 2018, approximately €90 million.
And then the last part of your question andy, was the split out of the 40% in Europe?
Yes. In very broad terms, out of that 40 points, France represents about 10 points of the 40%. Germany is about 9%. And the Benelux, similar, about 9% or so.
Okay and then a U.S./Canada breakdown of the North American?
Broadly, 15% and 5%.
We're now over to Flor O'Donoghue at Davy. Please go ahead.
Thank you. Just three from me. Firstly, just you mentioned in the results statement one of the deals was a business called Isocab Isobar. So just a little bit on that would be appreciated? The second, just wondering, broadly, what was the mix between price and volume in the organic revenue performance last year? And then finally, just a question on the whole FX area. Just wondering really if you could remind us on your transactional exposure rather than just your translation exposure across the business, if that's okay?
Okay, Flor, Isocab and Isobar. We -- the Isocab business that we acquired as part of the Thyssen acquisition -- I think it was in 2012 -- is a business focused on cold-storage applications, particularly in Belgium and France. And as part of that overall cold offering there's what we call cold-store doors which is a very distinct product set but a relatively small business. So Isocab and Isobar effectively have joined up. And it leaves Kingspan with a share of 62% of the combination. So it's quite small, but obviously makes sense just in its own right to drive some consolidation in that sector. Ultimately, down the track, clearly it'll be our ambition to own 100% of that business.
Yes. On FX, Flor, our manufacturing facilities are all generally in markets, so our transactional exposure is limited. The key currency exposure that we have is translation of overseas earnings. And the principle exposure in that regard is euro/sterling. And in very broad terms, every 1p move, sterling to the euro, is a translation impact of about €1.5 million. And then your third question, Flor, if you could just remind me of that?
All right, Geoff. Yes, it was just a broad sense of the price/volume mix of the organic revenues last year?
Yes. The organic revenue was about 5% and of that, volume was approximately 4% and price about 1%, overall. And within the price dynamic you've got a mix effect as well, so that's very much a general measure.
We now go to the line of Lush Mahendrarajah at Berenberg. Please go ahead. Your line is open.
Just two questions from me if I may. Firstly, in H2, it looks like you've maintained your trading profit margin above 10% despite consolidating those acquisitions and the steel price headwind. Was this largely due to successful price increases or was there still headwind maybe not as large as perhaps anticipated? Would it be possible to give us the trading profit bridge for H2?
And then secondly, in North America in the insulated panel business, you're talking about your margin-over-volume strategy there. Where's the main competition coming from? Is it lower grade alternatives? And is this a regional thing? Thank you.
Sorry, just the second question related -- say that again, please?
In North America, in the insulated panels business, in the -- in your press release today you're talking about a margin-over-volume strategy. I was just wondering where the -- is it competition? Is it from a lower-grade product and is it also regional? Just a bit more of the dynamics there, please. Thank you.
Yes. No problem. The H2 margin, as you say, was relatively consistent. I wouldn't be clapping ourselves on the back saying we had really strong recovery of raw materials. That's probably not the driver. We would have had supply contracts in place that were clearly honored by our suppliers which might have protected us somewhat in the second half, but then that began to unwind, clearly, in Q4. But we had anticipated this and had been putting through some increases in quarter four.
So that was the key issue there. Obviously -- and Geoff can provide more detail on it -- we would expect that to see some margin contraction in the current quarter and potentially into the second quarter as the increases continue. And that's simply owing to the lag impact of trying to pass this through.
In North America, yes, we've -- margin recovery obviously is a key issue there. We've -- I wouldn't say we're up against inferior products necessarily, but we have one reasonably substantial and at times can be an aggressive competitor. From time to time we react to that, but our preference in the second half of last year was to focus on improving our margin rather than necessarily volume. And that's just a lever we can pull back and forth from time to time depending on what our priority is.
Before we go to Gerard Moore at Investec [Operator Instructions]. And while we're waiting for any further questions, Gerard, over to you.
Just a few more questions from me, please. First of all, I was wondering if you could put some more numbers around the growth in the order book, maybe how it stands today relative to last year, be it for the Group or maybe some of the key markets I guess that we're looking at, like the UK and U.S..
Secondly then, I was wondering if you could just talk a little bit more about the contrasting performance between Germany and France. You suggested that maybe weather was holding back Germany, but I guess that should have hit France as well. So in France, is it a question that the Joris Ide acquisition is beginning to deliver? Are there different end markets that you're servicing in between the two countries or are there any particular dynamics there that you think explain the different performance?
And then finally, just on the UK, two add-on questions there. You mentioned in the press release that Kooltherm benefited from the MDI shortage. Maybe just explain how that happened and if you expect that advantage to be maintained?
And finally, if you could just maybe give an idea as you look at your access floors business, what type of decline, what scale of decline do you envisage in the second half of the year? Thanks.
Okay. Okay, Gerard. We -- on the order book, as a general worldwide number, it's approximately 5% up. And that's largely an insulated panel dynamic. In insulation boards, turnaround times are much quicker, so literally our order book could be days long there. But in insulated panels, typically it's about three months. So that's at around 5% up.
In terms of the Germany versus France dynamic, we've obviously had a very strong run for the last four years or five years in Germany, both organically and partly assisted by acquisition. And that's something -- we're certainly not pressing the panic button there, by any stretch, but it's just -- I'd say just a little bit of the puff has come out of that market in the last number of months. And that's, again, also what we'd be experiencing just at the present time.
In terms of France, it's got momentum. It's clearly coming from a more depressed background a number of years ago. It grew last year and we'd expect it to grow reasonably substantially in the current year. Part of that is activity and, as you mentioned, part of that clearly is the RC, the model really getting traction in that market.
So fundamentally, it's about penetration growth from built-up metal systems which is -- the conversion rate there is at a lower level than what it has been in the rest of Europe, so it's got more runway. And that's essentially what's driving the dynamic there.
In terms of Kooltherm and MDI, to -- from a practical perspective, these products, on site, are interchangeable, relatively similar board dimensions, handled in the same way and installed in the same way. So clearly, when MDI became particularly tight in the fourth quarter, as a business we had a reasonably unique opportunity to substitute some of the what would have been PIR board, MDI-based PIR board for Kooltherm. And yes, that's something that we're going to continue to drive, but again, it was a shortage that enabled us to do that.
And I really would emphasize the fact that that's a unique opportunity for us in times of tightness. And yes, that's something we would expect to continue to grow.
Maybe just a follow-up. If the order book for the UK was up by -- sorry, for the Group was up by 5%, can you tell us what it was in the UK?
Probably a little bit higher than that.
Okay. We'll go back to Robert Eason at Goodbody. Robert, back to you.
Sorry, just one follow-up question. I think it's on slide 28. You kindly provide the difference between all the different insulants and what Quadcore does. Can you put a similar dimension on the Kooltherm, the new generation that you've -- or the second generation that you've launched so we can just have some perspective of the level of improvement that it brings to the portfolio?
Yes, we can indeed. Thanks for pointing out that omission, Robert. We'll get that addressed. The Kooltherm 100 series has a similar thermal performance to Quadcore, so that's 18 milliwatts. So about a 10% improvement in terms of performance.
And we go back to the line of Yves Bromehead at Exane. In fact he's just dropped out, so -- there are no further questions at this stage. Gene, can I pass it back to you for any closing comments?
That's great. Thank you very much. We're all done here and we look forward to speaking to you all individually over the next coming days and weeks. Thank you.
This now concludes the call. Thank you all very much for attending and you may now disconnect.