Keller Group PLC (LSE:KLR) expects underlying operating profit to be materially ahead of current market expectations as strong trading continued into the third quarter.
In a trading update, the geotechnical specialist contractor said in North America it saw more resilient pricing than expected in Suncoast and sustained operational improvements in the foundations business which have resulted in a strong performance.
The recovery in operating margin was higher than forecast although the pricing benefit at Suncoast is expected to moderate into 2024 with the margin returning to more normalised levels.
In Europe, the macro-economic environment remains a challenge for the business, resulting in weak demand in the residential and commercial sectors across the region.
Keller said profitability in the region continues to be impacted by the competitive pricing environment and the impact of some challenging projects, whilst the effect of several large successful projects in the prior year provides a tough comparative.
As a result, the anticipated profitability improvement in the second half will “be less than expected and as a result we are taking appropriate corrective actions”, the firm said.
In Asia-Pacific, Middle East and Africa, Keller Australia is performing strongly, particularly in the infrastructure sector, and Austral has returned to profit in the third quarter as expected.
Cash generation for the year to date is considerably ahead of the prior year and better than expectations, Keller said.
It now expects the year-end net debt/EBITDA leverage ratio to be below 1.0x, well within the target range of 0.5x - 1.5x.