Kingspan Group plc (KGSPF) Q4 2023 Earnings Call Transcript

Kingspan Group plc (OTCPK:KGSPF) Q4 2023 Earnings Conference Call February 16, 2024 3:00 AM ET

Company Participants

Catriona Nicholson – IR

Gene Murtagh – CEO

Geoff Doherty – CFO

Conference Call Participants

Florence O’Donoghue – Davy

Shane Carberry – Goodbody.

Arnaud Lehmann – Bank of America

George Speak – BNP Paribas

Gregor Kuglitsch – UBS

Yves Bromehead – Societe Generale

Elodie Rall – JPMorgan

Cedar Ekblom – Morgan Stanley

Yassine Touahri – On Field Investment Research

Alexander Craeymeersch – Kepler Cheuvreux

Jonathan Coubrough – Numis

Brijesh Siya – HSBC

Harry Goad – Berenberg

Operator

Hello, everyone, and welcome to Kingspan Preliminary Results 2023. My name is Bruno, and I’ll be operating your call today.

[Operator Instructions] I will now hand over to your host and CEO, Gene Murtagh. Please go ahead.

Gene Murtagh

Thanks, Bruno. Good morning, everybody, and welcome to our 2023 results call. We’ll take you directly into the detail on Slide 3, please, titled 2023 in Summary. So basically, revenue, just over EUR eight billion which was minus 3%, and we go through the detail of the makeup of that shortly. Trading profits, 5% ahead, earnings up 7% and I think very significantly, greenhouse gas emissions, Scope one and two down over 50%, which obviously was a fairly monumental year in terms of emission reductions across the business.

By the business units, Insulated Panels, sales decreased 9%, very mixed markets, which we highlighted all through the year. Strong volume performance in France, the U.S. and Latin America, which I think not surprisingly was offset by subdued volumes in Central and Eastern Europe and indeed in the Nordics.

The vast majority of the reduction really was related to giving up cost deflation in our selling prices. So in essence, the cost declines in all of our businesses were pass-through so funded essentially by cost reductions. Similarly — and the Insulation business behind again by 8%, I’d say, reflecting very much the same type of trading pattern.

The technical insulation business and most significantly around district heating had a very strong year. We expect that ongoing to continue to perform very well for us, although it might be a little more subdued this year with I think the deflation in gas prices. But over the longer haul, we expect this to be a very significant performer for the business.

Significantly, we have been on a path of fanning out the full spectrum of insulation activities across the business and technologies. We took a very significant step forward on that front in recent times, even since the close of the year. So we’ve taken a 51% stake in the world’s largest producer of wood wall insulation, Steico.

We also entered the Hemp insulation business with the acquisition of HempFlax during the year. And just this morning, we made an announcement that we acquired the stone wool assets of Bachl in Germany or we’ve signed an agreement to acquire the stone wool assets of Bachl in Germany. And in summary, that brings us into the mineral fiber end, which is something we’ve signaled for a long time as part of the full spectrum.

This particular facility is the newest technology in Europe. When our investment is complete, it will be about 70,000 tonnes capacity. And over the next three years or so, we will invest further to get us to as close to zero carbon as possible, and that will be our differentiator in this sector going forward.

On our Roofing + Waterproofing business, again, I would say a significant progress. Revenue touching EUR 500 million, and that’s predominantly Europe. So our presence in North America is very insignificant for the time being but both what we have — what we’ve agreed is that we are allocating EUR 750 million of capital to this sector over the foreseeable future, and that will be largely around the establishment of greenfield combined membrane, polyiso facilities and also around metal roofing trims and fabrications.

So essentially, we’re going to be probably over the next five years, establishing five to six facilities and over the next two years, at least two. And we’ll come back to that later on in the discussion. And further progress on the Light & Air business, revenue close to EUR one billion. I think more significantly, the margins improved as we guided, and we expect to see further margin enhancement in that business over the current year.

And our Data + Flooring business has very strong momentum, in particular, in its data pipeline. The first half of the year will show meaningful improvements and we think real traction will be very visible in our revenue and order intake in the second half of the year, so very exciting on that whole front as well.

And I’ll hand you over to Geoff now to take us through the detail.

Geoff Doherty

Thanks, Gene. I’m turning to Slide 16 for the financial highlights. Group revenues, EUR 8.1 billion, down 3% versus 2022, and I’ll come to the constituents of that in a second. Trading profit growth of EUR 877 million, up 5% and that’s pretty much in line with the guidance that we issued in November.

Earnings per share up 7% to EUR 0.352. Our total dividend for the year up 7%, in line with earnings. So that includes a final dividend of EUR 0.0266. We had a record by a considerable margin in free cash flow, EUR 891 million of free cash generated in the year. And again, I’ll deal with that separately in a second. Very significant reduction in debt in the year, net debt at EUR 980 million, down 36%, Bearing in mind that also happened against the context of a development spend of EUR 480 million in the year between CapEx and M&A, so a considerable reduction.

Our trading margin advanced during the year by 80 basis points, and we’ll come to the divisional mix of that in a second. Our effective tax rate, 17.7%, and that’s what we’re penciling in for our effective rate of ’24. Leverage levels, 0.97x net debt to EBITDA, so below the 1x, and good progress on our ROCE measure advancing to 17%, up from 15.9% in 2022.

Turning to the next page, just to deal with the margin profile of the business. Initially, on the right-hand side of that page, you’ll see the progression in our trading profit since 2019. So compounded up 15.5% 2019 through 2023. From a margin perspective, dealing firstly with Insulated Panels, 12.2%. So very, very good progress year-on-year, reflecting market mix, product mix, but also volume growth in the second half of the year, in particular, where our panel volumes in the second half of ’23 grew by 8% versus the second half of ’22.

Insulation margin, 9.5%. This is the division which faced the residential market more than our other divisions. And obviously, that’s been under pressure worldwide. So the reduction in the margin in the year reflects the 9% underlying reduction in sales during the year. And again, we’re penciling in progress towards 10% in the current year in insulation.

And Roofing + Waterproofing, similar margin year-on-year. At this stage in the development of Roofing + Waterproofing , it has been about establishing the infrastructure and the business, but we’re very much committed to a medium-term return on sales objective of 10% in the division.

As Gene referred to at the outset, Light, Air + Water saw good progress in its margin during the year up to 8.1%. And again, inside the next couple of years or so, we should be knocking on the door of 10% and Data + Flooring had a very strong margin performance in the year at 13.5%. So overall, that combined to give us 80 basis points of an increase year-on-year.

The next stage bridges revenues and profits from ’22 to ’23 and just dealing with revenues in the first instance. So you’ll see that underlying revenues were down 7% or EUR 612 million. And the driver of that was the year-on-year reduction in raw material prices and the pass-through of that to our end markets was the driver. Acquisitions contributed EUR 466 million of sales in the year and currency was a 1% or so negative in the year in terms of currency translation.

From a profit perspective, the underlying progression in the margin of 80 basis points gave us an additional EUR 29 million of profits year-on-year. Acquisitions contributed EUR 30 million and currency was minus 2% in terms of the impact on trading profit.

The next page, Page 19, sets out the geographic profile year-on-year, and you will see that the key regions are more or less identical year-on-year in terms of the key end markets.

Page 20 deals with our record free cash flow performance. EBITDA in excess of EUR one billion. Working capital reduced by EUR 298 million. The principal reason for that was a reduction in inventories, comprising about EUR 280 million of that. Our working capital to sales ratio was 11.3% compared to 14.5% in 2022.

So we’re back to much more normalized levels of working capital compared to the last two financial years where we had elevated inventory levels due to supply chain disruptions and associated matters, but we’re back at our longer-term average rate from a working capital perspective.

Net CapEx for the year, EUR 233 million. Net finance cost, EUR 36 million. Taxation in line with the income statement charge during the year. So all of that combined to give us EUR 890 million of free cash flow in the year.

From a debt perspective, as I referenced at the outset, 36% reduction in debt and the principal reason for that is free cash flow offset by the acquisition spend in the year. But the strength of our balance sheet, just some commentary on that, set out on Page 22. Leverage, as I mentioned earlier, at 0.97x. We issued a new private placement loan notes in June ’23 with a 6-year maturity. That issuance is in excess of EUR 300 million.

Our total available liquidity at the end of December was EUR 1.87 billion, and that reflects the combination of cash balances on hand and undrawn facilities. So that, combined with our relatively low level of leverage at the end of the year, gives us plenty of optionality in terms of the development of the business. The weighted average maturity of all outstanding private placement loan notes is five years.

The ROCE performance is set out on Page 23. So it was pleasing to see us return back to 17% during 2023. The profit growth aided that and the reduction in working capital helped as well, clearly. The working capital metrics are set out on the right-hand side of the slide. And you’ll see we’re closer to where we were prior to 2019, 11.5% to 12% has been our long run average of working capital to sales. So we’re back generally in that zone now. And you can model 11.5% as being our working capital investments in terms of the working capital to sales ratio as we go forward.

So with that, I’ll hand back to Gene.

Gene Murtagh

Great, Geoff. Thank you. Just take you to Slide 29, which is titled outlook. Naturally, it’s very difficult to call this at such an early stage in the year. Like the vast majority of businesses in our industry, it was a slow start, kind of hampered by, I’d say, nontypically cold start to the year, actually in many markets. Activity has picked up notably in recent weeks.

And I’d say, encouragingly, from an order intake perspective, the Insulated Panels business has been up for eight months in a row. That trend has continued into 2024, which, as I say, is encouraging. And a relatively similar trend on the board business as well as we look around the business globally. So early days, slow start, but no reason at all to think that this won’t pick up to our normal pace in the very foreseeable future.

So with that, we’re happy to open it up to questions from the floor.

Question-and-Answer Session

Operator

[Operator Instructions] We do have our first question comes from Flor O’Donoghue from Davy. Flor, your line is now open.

Florence O’Donoghue

Thank you. Good morning, everyone. I’ll just go in on the… Hello, Katrina, can you hear me? Great. Sorry, I’m part of that. Sorry. So, yes, sorry, I was going to say I’m going to focus in on the planned investment in roofing in North America. Just be interested to hear your thoughts around what you’re hoping to achieve, what the impact could be with the level of projected investments and maybe also if you could give us a recap on the industrial logic behind what you’re planning to do? I know was covered as well in the event in Lyon last year, but just to hear again about the kind of the bigger picture around if that’s okay.

Gene Murtagh

Actually, sure, for — like it’s not particularly a secret that we’ve been looking at the flat roofing sector, in particular, in North America. We have a long established and very successful presence in that market from the Insulated Panel business and the flooring business, also insulation and daylighting. So it’s a clear gap in our portfolio.

It’s an extraordinarily attractive market. And from a technology point of view, we have it all in-house. So in terms of our ability to produce membrane and polyiso insulation like we’ve — as I said, we’ve got that in-house, and we’ve been out a donkey’s years from an insulation perspective, we just see scope to carve out around 15% share of the market over a reasonable time horizon.

But to do that, we’re going to have to greenfield with the latest technology. And actually, that process is well underway. So the core team is hired. We’re closing in on two existing facilities, one in the Northeast, one in Mid-America, which would obviously fast track the process.

And we’re pretty much at final spec stage on equipment selection. So yes, it’s obviously from the ground up and it will take time. But you’d be very aware of how attractive the profile of that sector is in the U.S. So it’s unavoidable for us really.

Florence O’Donoghue

And just to follow up on that, Gene, how much of the EUR 750 million could potentially be inorganic? I know you mentioned both organic and inorganic.

Gene Murtagh

Broadly, Flor, maybe half-half where we’ll have bite-size bolt-ons to complement the whole greenfield piece.

Florence O’Donoghue

And in terms of have you any sense of what that ultimately in terms of what could translate into kind of a EUR 750 million investment could mean from a revenue perspective?

Gene Murtagh

Probably double that. But it’s going to take some time, Flor.

Florence O’Donoghue

Of course, yes.

Operator

Our next question comes from Shane Carberry from Goodbody. Shane, you may proceed with your question

Shane Carberry

Thank you very much, guys. And thanks for taking my questions. Three for me, if I could. The first is probably on the second announcement which came out today. If you could give us a little bit more color on just the market opportunity there from a kind of a stone wool perspective would be helpful.

The second is, I kind of note in the release you talk about Data + Flooring potentially getting to over EUR one billion of sales over the next five years. I’d be interested to kind of hear a little bit more about how you get there? And I also note the margin in Data + Flooring this year was really, really strong at kind of 13.5%. So what is the kind of sustainable margin there going forward?

And then the last one from me is just — we obviously saw the recent news around Nordic Waterproofing as well last week. Could we get an update there from your perspective around the state of play there?

Gene Murtagh

Sure, sure, Shane. On the stone wool side, we want to kind of a balanced presence in this. We have no ambition whatsoever to have to pivot our existing kind of strategy and technology towards this. It’s very much about — we stated for a long time that the full spectrum and complete offering is absolutely fundamental to our thinking going forward.

And the reason for that is that different technologies suit different applications, and that’s the long and short of it and we want to be able to provide the most complete package to our specifiers and customers. As you know, we’re the world’s largest producer of stone wool and core insulated panels which is about 12% of our portfolio. And we’ve been at that for literally 20-plus years.

But in terms of the raw material side of it, we’ve — it’s been a gap and this is a very, very digestible, newest technology entry point. The market in Europe is probably something in the order of EUR four billion. So we’ll just — we’ll creep away at that and kind of see how we go.

From the Data + Flooring side, yes, the EUR one billion target, which we talked about at the CMD last year, is something that we can achieve largely organically over the next five years or so. It’s going to take a lot of investment in facilities and it’s really supported by the ever-increasing appetite for data.

And of course, with AI just at its very embryonic stage, but it’s yet to see what that will deliver. But for sure, the data requirement is going to increase radically and we’re very well positioned to take advantage of that. And from a margin perspective, flat to up is really the profile we would expect to see.

And then lastly was Nordic. So on Nordic, that’s going to — obviously, its formal offer process, and it’s going through the antitrust process concurrently. We made our offer of SEK 160 and that’s our offer. So it’s our — this is our fifth public outing in terms of going for public organizations. And each time we’ve made an offer, stuck to our price, and that will be the very same in this particular case.

Operator

Our next question comes from Arnaud Lehmann from Bank of America. Arnaud, you may proceed with your question. Thank you very much.

Arnaud Lehmann

It’s Arnaud Lehmann from Bank of America. Just maybe three quick questions. Could you come back on the trends in order intake in panels in Q4 and into January, sounds like they were quite consistent with your comments from Q3. But how much visibility, how much confidence do you have that the panel volumes can continue to increase in ’24? That’s my first question.

On insulation, especially in insulation boards, it sounds like residential markets are still weak. Are you seeing any sign of pricing pressure in for insulation products in the fourth quarter?

And lastly, on the tax rate, I think you confirmed the tax rate to be unchanged, but this rule around the 15% global minimum tax rate from 2023, is there any impact to expect from Kingspan?

Geoff Doherty

Thanks, Arnaud. I’ll take two of those three questions. Firstly, to deal with intake trends on panels, I think we had flagged in the third quarter of last year that we were starting to see a pickup in order intake trends across the business. We were up in seven consecutive months versus the same months of the previous year — last year and that has continued into the early part of this year.

I suppose the comparison and the comparative is also relevant that we’re coming from a pretty subdued base, but nonetheless, it’s growth. Our sales out of the door in insulated panels were up 8% in volume in the second half of the year. And that implies that the order intake trend in advance of that was trending similarly.

And that’s the shape of things as we move into the early part of this year. In terms of the global minimum effective tax rate of 15%, we’re already operating above that, so the 17.7% effective rate that we had in ’23, absent any individual tax rate changes in key territories, that’s our effective tax rate guidance for the next two years.

Gene Murtagh

And then on the insulation board side, residential market is unsurprisingly weak. You know that from everybody else. That’s particularly notable in Germany and the Nordics, I’d say. And from a pricing trend perspective, the beginning of the year is fairly consistent with Q4, and we certainly don’t expect it to be going any lower. And if anything, this affects the insulated panel business as well.

It’s quite likely that we see some cost inflation in the not-too-distant future, possibly around chemicals and steel, but it feels to be trending that way at least in Europe, and as always, you can take it that, that gets fully passed through to the market.

Operator

Our next question comes from George Speak from BNP Paribas. George, your line

George Speak

So just on the U.S. roofing expansion. So the U.S. roofing market is already very consolidated on the production side and the distribution side. Hence why it’s so attractive. But with that in mind, how do you grow organically in that market? And then also, should we assume that this investment, this EUR 750 million, does that take the acquisition of a large U.S. roofing platform off the table?

Gene Murtagh

Well, they are two reasonably sensitive questions. On the second one, like I wouldn’t say it takes anything off the table. Like we’re never close to any of that but to some extent, it’s pretty unrelated. In terms of it being a consolidated market, we have a lot of experience of breaking into markets forever.

We have a very well-established presence in our direct route to market via the Insulated Panels business. And actually, we’ll be leveraging those relationships on that platform. And from an insulation board perspective, bear in mind that we have an insulation presence in non-roofing which also has appetite for polyiso board in non-roofing applications. So there’s a number of different combinations here that we will be exploring.

George Speak

Okay. And then my second question was just on Europe. We hear some stories around signs of financial stress amongst developers, particularly in Germany. Are you seeing any signs of cancellation or poor customer credit or any signs of distress amongst customers?

Gene Murtagh

Yes, but not to a worrying extent. I think it’s fair to say there’s a reasonable amount of stress around. Germany hasn’t affected us today. Probably more so the U.K. is what we’d be most concerned about on that front.

George Speak

Okay. And any risk in France. Obviously, that’s been a very resilient market for you guys?

Gene Murtagh

And it doesn’t feel like it for now.

Operator

Our next question comes from Gregor Kuglitsch from UBS. Gregor, your line’s now open.

Gregor Kuglitsch

Hi, good morning. I’ve got two question as well, please. Maybe coming back to Data + Flooring, you’re right. You sort of mentioned the EUR one billion back in October. But I think you also said the margins could be up to, I think, you said 20%. Maybe that was heavily rounded. But can you just tell us, is there anything going on in terms of the profitability of particularly the sort of data-related work or revenues that you expect to be generating in that division as we sort of build that out? That’s the first question.

The second question is pricing. So I appreciate we’re sort of interpolating exit rates and so on. But looking at my sort of crude math, it suggests that you’re exiting panels at nearly down 20 in terms of price. I don’t know if that’s maybe a bit — I don’t know. Maybe you can correct me if that’s wrong. Just want to understand, I guess, if things stay as they are today, what do you think ’24 price increase or decline rather would be just sort of everything else equal?

And then there’s lots of different numbers now with CapEx in different divisions. But can you just remind us, or I guess, summarize if you do all of these investments, roofing, Data + Flooring, et cetera, what should be the sort of annual CapEx envelope going forward, let’s say, over the next two years?

Geoff Doherty

Thanks, Gregor. I’ll deal with a number of those. On Data + Flooring, I think the margin of 13.5% is a decent margin. And I think while there’s scope to progress that, we’re not holding out the prospect of 20% in the near term. But it ought to have some scope to advance from where it is now in the fullness of time.

Secondly, on — just on pricing, generally, panels pricing, reflecting input price moves during 2023, it was probably down mid-teens in the second half of the year versus the second half of 2022 and pricing actually now is reasonably stable as we’ve entered 2024. But nonetheless, will be down versus where we were this time last year.

So in terms of the moving parts from a sales perspective, with the volume — we also have some volume growth in the early part of the year as we’ve outlined in the likes of Insulated Panel, but there will be an offset in terms of the impact of pricing year-on-year.

It makes little sense for us to guide more beyond that in terms of where pricing is likely to be later in the year because that will be a — it’s more likely than not that we’ll see inflation rather than deflation. And as we’ve done in the past, if we see a little bit of inflation, but then clearly, we’ll be in the market to recover that. So — as I said, there’s a number of moving parts in all of that.

On CapEx, we do expect our CapEx to tick up a little bit in 2024 in the region of EUR 250 million. And the principal reason for that is the early-stage investment in the Roofing + Waterproofing strategy that we’ve outlined for the U.S.

Operator

Our next question comes from Yves Bromehead from Societe Generale. Yves, your line is now open.

Yves Bromehead

Good morning, everyone. Two questions on my side. The first one, just coming back on the U.S. flat roof market. I just wanted to understand, can you actually provide a bit more granularity into the capacity that you’re adding in the market? And also, what’s the sort of projected OpEx here, especially in terms of marketing and commercial push? Do you need to go towards a hiring spree there? Or do you have the teams in-house that you can leverage to cross-sell products?

And maybe just on that point, you mentioned 15% return on sales. Some of your competitors are north of 20%. So what’s the gap here? And my second question, if I could just push you on the guidance for 2024. If we have an exit rate, which implies lower prices in ’24, could EBIT actually be down in ’24 versus ’23?

Gene Murtagh

So just as a first phase, like let’s say, over the next three years, we established three combined facilities plus one for metal fabrications and trims which, by the way, is very much a kind of a four skill zone of ours already right around the world. And it’s very much a part of the package that has to get offered on the roof. So it’s membrane, it’s polyiso board and its fabrications to go with it is the key.

And by the way, we’re not under any illusions as to the kind of hill we got to climb in getting into this market. So three combined facilities would be able to give us something in the order of EUR 700 million, EUR 750 million of revenue. But obviously, that’s going to take a reasonable time to build up. And from a return on sales perspective we think 15% is a respectable target. I hear what you’re saying about the margins that are in the existing market, plus you know from history, they are very, very recent.

Geoff Doherty

Yes. And just then in terms of the outlook for 2024, we’re not giving prescriptive guidance, but I’d make the following observations. I mean our margin of 10.8% give or take, we ought to be able to hold that as we move through 2024. As we’ve outlined earlier, we’ve got volume growth in Insulated Panels. That clearly will be helpful. There is a pricing headwind year-on-year in the early part of the year versus the early part of last year, but we do expect a little bit of inflation as we move through the year. So they’re all going to be clearly key influencers on the outcome.

Operator

Next question comes from Elodie Rall from JPMorgan. Elodie, your line is now open.

Elodie Rall

Hi, good morning, everyone. Sorry to come back on guidance. But I think last year, at this time of the year, you gave a guidance on Q1. So I was wondering why this time, you didn’t? If there is any specific clouds or what’s the uncertainty there versus last year that prevents you from giving a more clearer guidance?

Geoff Doherty

I think this time last year, I think there was deep uncertainty as we moved into 2023, and we just felt at that stage, it would be helpful just to give some context — trading context. I mean, in terms of Q1 this year, we’ve outlined generally in the statement that seasonal factors were at play this year, more normal winter conditions in Europe and the U.S. But last year, it would have been atypical. We wouldn’t have generally given specific Q1 guidance. So I think last year was the outlier as opposed to this year being different.

Elodie Rall

Okay. And would you be able to give us a bit more color on the trends in data centers, warehouses, non-residential basically?

Gene Murtagh

Well, non-residential, obviously, is much, much more broad in scope than just the data side. Like I think on that side, we see obviously a very encouraging trajectory, not just in the amount of build, but in our portion of the technology that’s going into those buildings. So that’s like a lot of our growth is going to be coming from greater share of wallet rather than necessarily the build increase.

And generally speaking, I’d say, the non-residential side has been under pressure as well and may well come under further pressure this year, let’s see. But we’ve been very keen to focus on sectors that are somewhat more insulated from the macro trends, such as the one we just talked about.

Elodie Rall

Okay. And maybe a last question on margins. I think you said you expect insulation margin to recover to 10%. Obviously, this sector has been impacted by weak resi trends, but there’s a big divergence now with the insulation panels. So should we expect that to close and gross margins to be trending in the same ballpark?

Geoff Doherty

Yes. I think the margin dynamics are different in insulations than they are on panels at this particular juncture. And the key reason for that is that the insulation division faces the residential market more than any other. And that’s a market that has been under considerable pressure pretty much everywhere. So we’ve had to suffer the operating leverage impact of that.

All that being said, we’d like to think the 9.5% that we recorded in ’23 is a trough and we’re positioning ourselves for some improvement in that as we move through 2024 back towards 10%. I mean that we’ve said before, 10% really is in — not only in our installation business, but in other categories, remains the medium-term goal. But I think we can get back into that zone in 2024 in insulation.

Operator

Our next question comes from Cedar Ekblom from Morgan Stanley. Cedar, your line is now open.

Cedar Ekblom

Thanks very much. Hi, everyone. I’ve got a question just on your comments on price increases. So if we look at spot steel and chemical inputs, they seem to actually be declining in Europe or at least showing no signs of any real inflation.

So the question is, would you try and push price increases in your panels business in a firmer demand backdrop even if you don’t get an inflationary cost backdrop and so we could actually think about margin expansion in that division.

Secondly, on the roofing revenues, Gene, can you just confirm what the number is that we should be thinking about in the next five years? I think you said EUR 750 million in one answer, but then in another you said you think you could generate sort of double that investment at revenues. So just to understand the timing.

And then on Data + Flooring, that’s obviously where the growth has been for your business as it relates to the data center end market. Are you winning any business in your panels offering because you have sort of a market-leading position in — I think it’s your internal installation, is that the right way to sort of refer to that product?

But basically, is there any cross-selling coming through? Are you winning panels business because you’re winning business in the Data + Flooring division?

Gene Murtagh

Yes. So on the pricing in panel, Cedar, it’s — right now with the kind of — with the — I guess, the macro environment, we wouldn’t see an opportunity, bar it being in new technology or a differentiated product, clearly, we wouldn’t see scope for prices outside of an inflationary cost environment. So — and in terms of the trends you’re seeing or the indicators you’re looking at, well, that’s great. If there is no increase, that’s also fine but we actually do anticipate some, but nothing like what we experienced in the not-too-distant past.

And just to clarify the numbers. So we think around EUR 750 million of revenue will be achieved within the next five years for that EUR 750 million investment and thereafter, longer-term, building up to twice that. So in terms of a greenfield investment of EUR 750 million plus — sorry, including some of the bolt-ons, we’d estimate that revenue will be about 2x that over the longer term and we can’t just magic ourselves into that position, clearly, it’s going to take time.

And then on the third point, cross-selling, I wouldn’t say necessarily cross-selling, I would say a lot of sharing of projects and contacts and pipeline between the different businesses on data. So yes, like in essence, we literally get the flat roof insulation, the external walls, the internal clean room and naturally all of the Data + Flooring solutions going into the building. So like in total, it’s a very significant opportunity for us in terms of the amount of products there we can get into a single building.

Cedar Ekblom

And just to confirm, all that other installation that you’re selling, so the flat roof and the internal wall installation, that would sit in the insulation business rather than the Data + Flooring?

Gene Murtagh

Yes. Yes, absolutely. They’re very, very distinct product offerings.

Operator

Our next question comes from Yassine Touahri from On Field Investment Research. Yassine, your line is now open.

Yassine Touahri

Yes. Good morning. Maybe a first question on your acquisition — on the acquisition impact in 2024. Can you give us a bit more color about what you expect with this stone wool acquisition, STEICO? And what kind of impact do you expect on sales and on trading profit? Or just a range would be very helpful.

Also, could you give us an update about the situation with Nordic Waterproofing? I think the Board of Nordic Waterproofing is asking for a higher price?

And then the last question, which is a bit more of a question about last year. Could you just help us at the full year level to give us a split between volume and price for boards and panel? That would be also very helpful.

Geoff Doherty

Thanks, Yassine. I’ll take a couple of those questions. Firstly, on acquisition scope. The most significant item will be the impact of STEICO, which we completed in the very early part of January. If we look at STEICO consensus for 2023, broadly revenues of EUR 370 million and trading profit of EUR 30 million. So we ought to — that’s the run rate as we head into 2024.

The stone wool investment, I would say, will have a modest impact on earnings in 2024. And beyond that, acquisitions that we completed in 2023, given their timing, it won’t really have much of a run rate impact as we move through 2024. So the key item at this stage really is STEICO.

As regards to kind of price volume dynamics, they’re set out pretty clearly for insulated panels H1 versus H2 in the statement. In boards, given the mix of products categories that we have within — sorry, in insulation, given the mix of products that we have within that division, it makes little sense for us now to split out volume and price.

Underlying sales were down 9% across the year. Thematically, what I would say is volumes were down more in the first half than they were in second half, but overall, underlying sales were down 9% in insulation across the year.

Gene Murtagh

And then on Nordic, Yassine, it’s — first of all, it’s got to get through the antitrust process, which since we’re not really in that business shouldn’t be an issue, but that takes a lot of time. And there’s a little more to be said on the number. So the — we made an offer which the Board didn’t support and it will go to shareholders eventually and let’s see what happens.

Operator

Our next question comes from Alexander Craeymeersch from Kepler. Alexander, your line is now open.

Alexander Craeymeersch

Alexander Craeymeersch speaking from Kepler Cheuvreux. So yes, just one question or two questions. One would be if you could maybe give some extra details on the capacity utilization in the panel business. Considering your solid margins in the second half, I can only imagine that you work at a high utilization rate. My estimate would be somewhere between 85%, 90%. Does that sound about correct? And maybe if you could provide a split between Europe and U.S.?

And then the second question would be on the Karl Bachl acquisition. So in the roll call you mentioned that it’s been somewhat of a gap in your strategy. So could you maybe — can we expect more acquisitions in this space? Or would you maybe consider greenfield investments more? And if the former, there’s a large colloquial view that is quoted at somewhat a multiple that is typically done by you if you do acquisitions. So I was just wondering if you maybe see some opportunities there.

Gene Murtagh

On the utilization question, Alexander, I’d say, like first of all, it’s really very local. We would have some very highly utilized facilities and some much lower. And like in the round, it’s probably something 65% but honestly, it’s not a meaningful figure when you take it from a global perspective.

In terms of Karl Bachl, like it’s a first entry, it’s a gap like we said, we see it having its appropriate fit within the organization as part of the spectrum. And will it lead to some further moves, I would say, definitely is the answer to that. What shape that takes, let’s see, as time evolves. And I didn’t quite get the point you made, the last point you made.

Alexander Craeymeersch

Second question would be because you’re looking to stone wool which was somewhat of a gap in your strategy. Can we either expect more acquisitions in this space or rather greenfield investments going forward? Are you looking more at your own capacity? Or are you really looking forward to make heavy investments in this space?

Gene Murtagh

So yes, the answer is still the same. And yes, we’re — it’s not for internal supply. It’s to enter the space.

Operator

Our next question comes from Jonny Coubrough from Numis. Johnny, your line is now open.

Jonathan Coubrough

Thanks very much. Just keen to hear about mix dynamics and the impact on the margin potentially in FY ’24, you pulled out market mix out last year. And within that also what you’re seeing in the U.S. at the moment and whether you expect mega projects continue to be a large part of it this year?

Geoff Doherty

Sorry, Jonny, just — is the question on margin? I didn’t quite get the…

Jonathan Coubrough

Yes.

Geoff Doherty

Yes, I mean, overall, just given the mix of markets that we’re in, mix of categories that we’re in, the 10.8% that we made in 2023 ought to be — that ought to be a reasonable target for the year ahead. Thematically, Insulated Panels made 12.2% in 2023. That could be a touch lower. Insulation, as we mentioned earlier, at 9.5%, perhaps some scope there.

Roofing + Waterproofing, we’ve been progressing that steadily. Light, Air + Water, we’ve been on a path over the last number of years of solid progression each year. And again, we’d be targeting that for this year. So there’s — there are several moving parts, all of which ought combined to give us a trading margin in the mid- to high 10s.

Operator

Our next question comes from Brijesh Siya from HSBC. Brijesh, your line is now open.

Brijesh Siya

Hi, good afternoon. Good morning. I have two questions. The first one is on the foray into stone wool. So do we look at it as a — it’s because historically, you have been a big consumer of stone wool for your insulated panel products. So when we look at the future, is that to be restricted to insulated panel or you are looking to kind of expanding the board business and looking to put stone wool therein as well?

And the second question is more about Grenfell, whether you have any update to share. We did see some news in the year about a settlement, any update there would be great.

Gene Murtagh

On the mineral fiber side, yes, it would be two or even threefold, like there’s obviously the internal consumption, which will not be the priority. So we expect to be selling the product through our insulation channels and indeed, through our roofing channels as well as part of, as we keep saying that a full offering. So we’ll be able to offer the widest combination of different insulation and roofing solutions to the market. That’s what that’s about. In terms of Grenfell, no, we have no update whatsoever.

Operator

Our next question comes from Harry Goad from Berenberg. Harry, your line is now open.

Harry Goad

My question is around the organic CapEx expansion program, please. I guess, firstly, can you remind us what we should expect in terms of sort of incremental contribution to revenue in 2024 from new assets that were opened in ’23 and more generally, what we should think about their contribution over the medium term?

And then the second one around that is when you’re thinking of new regions to expand into or new CapEx programs, are you thinking expanding more into sort of the newer geographies, the Brazils, the Colombias, the Paraguays, for example? Or are you thinking about incremental new countries to enter into?

Geoff Doherty

Yes. The capacity expansion is set out, Harry, on Page 12 in the deck. I mean we expand capacity for a number of reasons both for the short and the longer term. Different markets are running at different speeds. We’ve had really, really strong growth, for example, in Insulated Panels in the Americas. So naturally, you’ll see that feature fairly prominently in our capital plans.

Data + Flooring, as we’ve highlighted, we’ve got significant ambition there as we go forward. And that features in our CapEx plans. So there’s different reasons for individual CapEx projects. As we’ve outlined as well with the growth that we’ve seen in Insulated Panels of 8% in the second half of the year and trending positively as we go into this year, some of our capacity plans will help that. But it’s not possible to kind of prescriptively give you what last year’s CapEx amounts to in terms of 2024 sales.

And we expect to, as I say, commit another EUR 250 million organically this year. And that’s to support the ongoing advancement in the growth of the business. And again, there’s another slide in the deck, which points out the growth of the business over time. And our capacity plans naturally are supportive of our future plans.

Operator

We currently have no further questions. I would like to hand the call over to the room.

Gene Murtagh

Thanks, Bruno. And indeed, thank everybody for joining the call, and we look forward to speaking to you over the next few days.