INSULATION and roofing group SIG is forecasting annual profits above current estimates after its markets stabilised during the second half of 2010.
The Sheffield-based company said residential construction levels in its major markets, which include the UK, France and Germany, turned modestly positive from a low base in 2010, and it expects the growth to continue into 2011.
After a steep fall in 2009, the company said that private sector non-residential construction activity experienced a slowing in the rate of decline in the second half of 2010.
It added that public sector construction work benefited from significant Government investment programmes throughout the year.
But the company warned that Government spending cuts are likely to cause a dip in new construction in the public sector as the year progresses, offsetting the mild growth in the private sector.
SIG, which began life as Sheffield Insulations Group, said pre-tax profits for 2010 before amortisation and exceptional items would not be less than analysts' November estimates of 61.3m.
The average consensus estimate had come down significantly since November to about 53m.
SIG, which supplies specialist products to the construction sector, expects a two per cent fall in full-year sales to 2.69bn, slightly above estimates of 2.68bn.
The group's shares closed up 9.77 per cent last night, a rise of 13.30p to 149.50p.
SIG said it will announce its results for the year to December 31 on March 17.
The group said that sales at the end of November and throughout December were affected by the severe winter weather conditions in the UK and Northern & Central Europe, causing heavy disruption to construction activity.
Despite this, the board is confident its profits will not be less than 61.3m.
Net debt has been reduced by around 65m from 255m at the end of 2009 to around 190m at the end of 2010.
The group said that intense focus on cash management continued throughout the year, resulting in good cash generation. This was achieved through trading cash flows, strong working capital management and a tight rein on capital expenditure.
The latest programme of cost saving measures should generate further annualised cost savings of around 7m.