Ladies and gentlemen, welcome to the Kingspan 2019 full year results conference call. My name is Felicia, and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I will now hand you over to your host, Gene Murtagh, Chief Executive Officer, to begin. Gene, please go ahead.
Okay. Thank you very much, and good morning, everybody. Welcome to our 2019 results call. There is a good bit of detail in advance of the results itself in the presentation that we'll either come back to in Q&A or it's worth actually exploring yourselves in any event, rather than taking up the call with it right now. If we could move directly into the results, that's on slide number 14, which is titled 2019 in summary. In essence, we had a very good year, actually. Revenue was up 7%, to EUR 4.7 billion. Profit up, trading profit just short of EUR 500 million, and basic EPS up 11% to almost EUR 2.05. All of the businesses actually performed quite well in the year, both at an organic level. From an acquisition perspective, there was actually very little activity apart from the Bacacier acquisition close to year-end in France.
Just by business unit, the insulated panels business grew at 7% worldwide, particularly strong in the Americas and most of mainland Europe, and understandably weak in the U.K., in particular in the last quarter. In fact, the early part of the year in the U.K., as we'd have reported before, was quite strong, but that faltered significantly towards year-end, and that's affecting us obviously at the beginning of this year as well. QuadCore, which is a key part of our strategy in the insulated panels business, now represents 9% of global sales. In absolute terms, it grew 36% year-over-year, which is very encouraging, and we see that pattern of growth continuing, and potentially even accelerating into this year. At a volume level incidentally, at an underlying volume level, insulated panels grew 4% year-on-year, like for like.
The insulation board business revenue was up 2%, and this business in particular would have seen significant deflationary pressure. You recall a couple of years ago where MDI was extraordinarily high. Well, as that came off, so too did the pricing in particular of our PIR board business, which if you like, curtailed the sales growth. At a like for like volume level, once again, that business in fact was up 8% year on year, which is very encouraging at an organic level. The light and air business really had a great year with revenue up 12%, and that was all like for like organic growth. Particularly strong in North America, and well improved in Western Europe and in particular in France.
Again, we'd say that trend has continued into this year where the Benelux and Southern Europe is strong, and North America again has started the year in good shape. Margins are improving there gradually, our medium-term target is still to get to the 10% return on sales, and we're on track, I would say, to achieve that. The Water & Energy business revenue grew 3%, relatively steady, our Data & F looring business driven particularly by the former, which is the data side, actually had a strong year with 13% revenue growth. As I say, a lot of that activity now focused in large scale data centers, which is also incidentally a significant driver of growth in the panels business and indeed the board business from a flat roofing insulation perspective.
That in essence captures the summary of the results, and I'll now hand you over to Geoff on page 15.
Thanks, Gene. Just to go through some of the financial highlights on page 15. Group revenues, EUR 4.66 billion, up 7% year-on-year. I'll come to the components of that growth shortly. Group trading profit 12% ahead at EUR 497.1. Group earnings per share grew by 11% to EUR 2.046. Our final dividend of EUR 0.335 brought the total dividend for the year to EUR 0.465 or up 11% on the previous year. Strong free cash flow performance there. Again, we'll go through the detail of that in a second. Free cash flow up 9% to EUR 337 million. Net debt, just to be clear about it, is calculated on a pre IFRS 16 basis, which is pre the leasing standard. Our net debt was EUR 633 million, down EUR 95 million on the previous year. Trading margin was up 50 basis points to 10.7%.
Our net debt to EBITDA, again, calculated pre IFRS 16, which is consistent with our banking agreements, 1.1x compared to 1.4 x the previous year. Our effective tax rate down modestly to 16.9%, that really just reflects the relative weighting of our earnings year-on-year from a geography perspective. We continue to progress our return on capital employed up 50 basis points to 17.3%. Just to deal with IFRS 16, which I have referenced there a couple of times. There's EUR 122 million of capitalized leases included in payables on our balance sheet, so not classified as debt, that's consistent with our banking definitions. Moving to page 16, which just shows the progression in trading profit over the last five years. You'll see from 2015 through to 2019, a compounded profit growth of a little over 18%.
From a margin perspective, the profile of our margins by division is set out on the right-hand side of the chart. Insulated Panels, up 40 basis points there in the year. Much of that was to do with both sales mix, but also an element of operating leverage on foot of the 4% volume growth that we saw across the group. Insulation Boards, an exceptionally strong margin at 13.4%, well up on the previous year. That would reflect a positive Kooltherm mix, but also an element of lag as well associated with the raw material deflation that we saw during the year. Light & Air continues to progress its margin, 7.7% in the year. That will continue to build over the coming years as activity levels grow. Water & Energy at 6.8%, broadly in line with the previous year.
Data & Flooring at 11.4%, still a strong margin in absolute terms, down marginally on the previous year. Again, that really reflects the relative geographic mix of the business, but strong nonetheless. All of that combined to give a group margin up 50 basis points to 10.7%. Page 17 just bridges the sales and profit year-on-year. Firstly, to deal with the revenue bridge. In overall terms, revenues grew by 7%. In terms of what the movements were, currency added EUR 40 million to revenue, which is 1%. Acquisitions contributed EUR 199 million or 5% out of the seven. Underlying revenues grew by 1% or EUR 47 million. From a profit perspective, group trading profit grew by 12%, and the components of that were currency was EUR 6 million positive or 2%.
Acquisitions contributed EUR 18 million or 4%. Underlying profits grew by EUR 27.8 million or 6% across the year. Our free cash flow performance is set out on page 18. Strong free cash flow performance in the year, delivering EUR 337 million, up 9%. Naturally, the strongest driver of that was our EBITDA, EUR 580 million of EBITDA. We had a decent working capital performance in the year as well. 11.9% of sales was our average investment in working capital.
The other key constituents of the free cash flow performance, our cash interest expense was EUR 16.7 million. Our cash tax was a little over EUR 87 million. Our net capital expenditure across the business was EUR 154.3 million. Reconciling net debt, which is on page 19. We ended the year at EUR 633.2 million. The key movements through the year were free cash flow reduced debt by EUR 337 million.
Acquisitions, our acquisition spend was EUR 142 million, of which Bacacier was the significant element of that. That was incurred late in the year. Our dividend was EUR 78 million. We paid deferred consideration on previous acquisitions of EUR 29.7 million. All of that combined to land us at EUR 633 million at year-end. Return on capital employed is a key metric in the business. In absolute terms, our return on capital employed was 17.3% in 2019. If you annualize the impact of acquisitions, given that they were very much back-end loaded, the annualized return is approximately 17.7%. We continue to build on our returns profile. From a geography perspective, the profile is set out on page 21. Our biggest geography is Europe, 53% of global revenues in 2019, up from 52% in 2018. In absolute terms, grew by 10%.
The Americas, a little under EUR 1 billion now, EUR 991 million, up 8%. The Americas comprises 21% of our global revenues. The U.K. revenues were down 6% in the year to EUR 892 million, with the U.K. now comprising 19% of our group revenues. Rest of world, our revenues grew by 4% to EUR 313.7 million, rest of world comprises 7% of our global revenues. With that, actually the strength of our balance sheet, before I hand back to Gene, the strength of our balance sheet is highlighted on page 22. In terms of our principal funding basis, we've a EUR 300 million revolving credit facility, which was undrawn at year-end, and that was arranged during the 2019 financial year. We have a pre-existing revolving credit facility of a little over EUR 450 million, which again, was undrawn at year-end.
Post year-end, we've agreed a green loan of EUR 50 million, and that's to fund the group's Planet Passionate initiatives, the internal initiatives that we have within the group. We've a ring-fenced green loan to help with that. The combination of our available cash balances on hand and committed undrawn facilities is a little under EUR 1 billion, EUR 992 million to be specific. The weighted average maturity of our debt is four and a half years. With that, I will hand back to Gene.
Great. Thank you, Geoff. We'll take you now to slide number 29, which is titled The Outlook. In essence, the start of 2020 has actually been reasonably difficult in January. We would have pointed towards this in our November IMS, which largely was a result of weakening intake at the time in the U.K. That's translated into poor enough dispatches, in particular in the U.K. in January. Overall, in fact, oddly enough, it was a short month for us, which meant we had less trading days year-over-year, which left us slightly behind prior year. That said, for the last three or four weeks, order intake, which is the key forward-looking indicator for us has improved both in the panels and the board businesses. There's been a decent uptick in intake across most of our geographies, which should bode well for the second quarter dispatches.
Our acquisition pipeline is healthy. I'd have to say that it's always pretty healthy. You'll have noted last year, not much happened. Geoff spoke about that. Once again, healthy. We have a number of active projects presently and comfortably around EUR 750 million of headroom without breaching our own fairly conservative limits of 2x debt to EBITDA. That area of the business is in good shape. It's the most unpredictable part of our business, of course. There's no guarantees we'll ever actually transact. From the climate agenda piece, that debate obviously has flared up worldwide. Our business is naturally squarely positioned in that area. Our whole business really is about energy conservation in terms of what we do. As well as that, how we do it is becoming increasingly important.
We're 10 years into our net zero energy program. This isn't kind of new material for Kingspan. We set a target in 2011 of getting to net zero by 2020, which we were just about to. Going forward, we've set the bar much higher right across the business in what we call our Planet Passionate program, which covers energy, carbon, circularity, and water harvesting right throughout the group. This is an initiative with 12 very specific and demanding commitments that we've made, and the whole business is aligned on this. Literally every single facility is aligned, and that agenda is a core part of what we want to achieve over the next decade. Our global footprint has been expanding dramatically over the last four or five years, and I think it's back on slide 10.
You can see what we're looking at presently in terms of the next two to three years of global expansion, which is very significant as well. In essence, I think that takes us out of the presentation, and we're happy to throw it open to you all for questions.
The first question we have is from David O'Brien from Goodbody. David, your line is now open.
Great. Thanks, guys for taking the questions. Firstly, if I could bring you back to slide seven, could you just walk us through some of the detail in terms of the competitive advantage of QuadCore as you've laid out there? In addition to that, the prospects for the QuadCore product in terms of what size it could become within the Kingspan portfolio over the next 5-10 years. Secondly, just touching on Planet Passionate as well. On slide nine, you outline more detail. If you could maybe just bring us through a bit of that color. What does it mean for the internal workings of Kingspan? Should we be thinking about this as purely a cost, or will there be some sort of return on it? What has the reaction of suppliers and customers been to the initiative, please?
Okay, David, thank you. Slide seven, as you asked for first. This comes up from time to time. What's QuadCore and how does it differ from traditional materials, et cetera? We felt the best way to articulate that was actually pick a sample project rather than talking about the theory of it. For a building with a 100,000 sq m wall requirement, which is not untypical these days. We're seeing massive data facilities, obviously the whole online trading piece. General retail is seeing facilities in this kind of 100,000 sq m category. Just to pick one of those, if you were to go to QuadCore over mineral fiber, and this is to achieve a fairly demanding U-value of about 0.12, it would require 300 mm of the mineral fiber product, which the QuadCore would be maximum 150 mm by comparison.
The implications of that, even if you talk about the Planet piece, it's almost 340-foot trucks less on the road, and obviously less on a site in terms of congestion, etc. The actual like-for-like panel cost would be around 25% lower, and that's just at a pure panel level. That gives significant installation cost savings, and also accessory cost savings related to the thicker products, which are extremely material. Over on the right-hand side of that, you can see it's about 1,300 tons lighter structure required because the product is so much thinner and easier to handle. From a fire perspective, we have a 60-minute, what's known as an EI60 standard, which is very demanding for any material. QuadCore has achieved that, and in fact, we'd be confident that in certain configurations, an EI90 will be achievable very shortly.
Most crucially of all, we provide a 40-year thermal guarantee, i.e., where there's no energy performance degradation in a product, which we were not in a position to do over mineral fiber. They're the key practical differentiators between QuadCore and older material. What it means for us in terms of where it can go in the business, as I mentioned on the call, it's 9% of our global sales presently, and we have a medium-term target of that achieving 50%. We, the whole team, will be confident of achieving that probably over about a five-year period. The second point, David, was on Planet Passionate is on slide nine. Well, it's kind of self-explanatory there. We've 12 specific demanding initiatives across those four headings of energy, carbon, circularity, and water. This is real.
It's a very embedded initiative throughout Kingspan, and it's coming hot on the heels of our net zero energy agenda. This isn't new material for us. As some examples, we want all of our sites to have solar power generation. We're committed to zero-emission cars worldwide by 2025. The circularity piece in terms of using PET bottles or plastic bottles in our process is already well underway. We'll use about 300 million bottles this year, a lot of which is going into QuadCore, and we have a five-year intention of that being 100% of all QuadCore will be fueled by PET. Zero waste to landfill, our ocean and water projects are well underway as well. We obviously have a rainwater harvesting business in our water and energy piece.
We expect for the group at its present size to harvest and reuse about 100 million liters of water over that period. Sorry, by the end of that period annually. Probably the most demanding part of this is from a supplier perspective. We want to get supplier alignment to make this even deeper and more meaningful. That's obviously a challenge, but something that we've engaged already with the primary supply chain, and actually it's been received quite well. From a returns perspective, each of these projects have to stand on their own. We're not just blindly investing in all of these areas just for pure goodness sake. We are a business.
We're a business that's focused on returns, and each of these projects have to stand up one by one, and a fair bit of it will be funded by the green bond that Geoff alluded to earlier on.
Great. Cheers. Thanks for the detail.
Our next question comes from Tobias Weimann from Morgan Stanley. Tobias, your line is now open.
Hi, thank you for taking my questions. The first one is on the board margins. You talked earlier on the call about the positive impact from the Kooltherm mix, but also from the lag effect from the price raw material effects. Is there any reason why we should expect this trend to reverse in 2020? I guess the Kooltherm effect will continue to be positive. In fact, you just said you want to go from 9%- 50% of sales over the next five years. If I look at raw materials, they also seem to be still favorable. How should we think about board margins in 2020?
Well, just on board margin, we've been saying for some time that the margins that we've experienced through 2019 at 13.4%, that is exceptionally strong, and I would underscore the word exceptionally. A key theme during 2019 was deflation. I think we held on to that deflation for a little bit longer than we would have anticipated. That will naturally unwind through 2020. Our best sense at this point is that margins in insulation through 2020 will be mid-12% as opposed to the 13.4% that we saw in 2019. That's really just the extended lag around that deflation. Probably just a note of caution there as well. As we noted earlier, the MDI market has been fluctuating fairly extensively over the last couple of years. It peaked about 18 months ago. It troughs probably just about now.
Just depending how things go in China with regard to the virus, it's a significant source of MDI material worldwide, which has the potential to get disrupted. If it does, to be honest, we'd be nervous about the MDI inflating once again. That's something we keep a very close eye on over the next weeks, in fact, not even months.
If you're saying mid-12%, are you assuming that MDI prices are going up throughout the year? Or is this based on the assumption of spot prices?
That assumes flat. That assumes where we are now.
Okay. That makes sense. Just, yeah, following up on the pricing side as well, I think, you disclosed your volumes earlier, so you can sort of spec out the pricing, and it seems the year-on-year pricing in boards was down 8%-9% in the second half in panels, I think was down around 3%, which I think is similar to what you have talked about in the first half of the year. I think the comparison base was a bit lower in H2. Does this imply that prices sequentially have gone down from H1 to H2?
Yes.
Yes.
That's correct.
Yes.
As a follow-up, how should we think about pricing for 2020? Obviously raw materials are still down. If I look at MDI, it's currently, I think, in the spot price, down 10% year-on-year. Should we expect pricing to still be weak in 2020? Was your guidance for negative organic growth in Q1 mainly based on lower volumes?
The volume in January for sure was under pressure. We'd expect less so in February and March. From a pricing perspective, we're still seeing downward pressure in our selling prices, particularly on board, and as you rightly point out, it's largely MDI related.
Okay, perfect. Just a final follow-up on your-
As we said-
Sorry, go ahead.
As we said, this is a moving feast, and we can't really understate the potential impact of the China piece in terms of inflation.
Okay, that makes sense. Just a final follow-up on the U.K. Obviously Q1, you said it's still weak. Maybe can you talk a little bit, if you look at your order book, do you expect an improvement in the U.K., maybe in Q2 or at least in the second half of the year? I guess the comparison base will get easier as well? Do you think the U.K. will remain weak throughout the year?
It has started weak, which is a result of the weak intake in Q4. That's, if you like, the dice cast for Q1. We carry an order book generally of about three months on average in insulated panels, so we've that kind of hard visibility. The intake has improved encouragingly, I'd say, in February. Not good in January, improved well in February. We ought to see year-on-year at least a steady business from Q2 on.
Okay. That's very clear. Thank you very much.
Okay. Sure.
Our next question is from Flor O'Donoghue from Davy. Flor, your line is now open.
Thank you. Good morning, everyone. Just a couple from me. One is just on what you're seeing in Europe at the moment, I guess with particular reference to Germany, France, and maybe the Netherlands as well. The second one, if I may just refer to the slide deck as well. Slide 10, as ever, a very interesting slide on your global organic expansion. Just be interesting to hear a bit more on the agenda there. It looks relative to the last time you had the slide up. There's a few new projects gone in there. Your thoughts around that would be very appreciated. Thanks very much.
Okay, Flor. Just in terms of the end markets, I think we've talked enough about the U.K., and that's clear. Germany has continued to be reasonably weak, actually. There's a lot of news out there in terms of industries far beyond us, auto, other industrial industries, et cetera, that are particularly weak, and that is having a knock-on effect on the ground, and we're seeing that in demand. So far in the year, we're actually behind in Germany, and we'd have no reason from where we're standing now to think that that's going to change any. The Netherlands actually has been weak enough as well, and that's owing to a couple of environmental measures that maybe are a little over the top in the Netherlands, which has cut back on activity on building sites.
We'd be reasonably optimistic about those measures being adjusted, let's say, to allow activity resume on a number of sites that have been held back. The Netherlands is slow for now, but that should change. France, you asked about as well, encouraging, I'd say, in a word. We had a good year there last year, and we've had a very decent start in France. We'd be optimistic about that. On the slide 10, which you refer to, yes, there are a number of new projects there, but this is our next two- to three-year pipeline of organic developments. New to this would be the couple of lines in Brazil. We just completed one last year. We're building a new facility right now in the very southern part.
Then in mid to north of the country, we expect to build what would be a sixth facility in the portfolio next year. That's encouraging. We're in fact looking at some other regions in Latin America as well concurrently. We're building an insulated panel line in the Northeast and actually under the same roof, that's in the U.S. rather. Under the same roof, we intend to build a PIR board line, which will be our first. Our presence in insulation there so far is really limited to XPS in our Winchester business. The PIR market and flat roofing in particular is very large in North America, so this will be our first serious attempt at that. Then just dotted right across the world, there's a number of other initiatives from the K-Roc plant in our Sydney facility, for panels.
New to us will be Southeast Asia, where we're very actively looking at a start-up in Vietnam, which would hopefully kick off later this year for commissioning next year. Yeah, a very healthy portfolio of new projects there.
Great, thank you. Just a quick follow-up for Geoff. Geoff, have you guidance on CapEx for this year?
Approximately EUR 160 million.
Great. Thanks very much. Thank you.
Thanks, Flor.
Our next question comes from Gregor Kuglitsch from UBS. Gregor, your line is now open.
Hi. Good morning. A few questions.
Hi, Gregor.
Just coming back to the, I think this was mentioned in the text, I don't know if you've mentioned it in the presentation, on this sort of thing you call it AlphaCore, which is the sort of fiber-free-
Yeah
if I'm not mistaken.
That's it.
fire safety kind of product, because obviously that's been an issue in the U.K. Wanted to get an update there and how you see that perhaps kind of panning out, and perhaps you could therefore increase your share a little bit in the high-rise. Just coming back to QuadCore. Appreciate the slide, which is very interesting, but how does it compare to your existing panels? I just wonder, obviously there's probably an element of QuadCore replacing some of your legacy panels, if I'm not mistaken. What's the improvement kind of compared to that? In that context, you commented QuadCore will be 50%, or that's the sort of midterm aim.
Is there an element of, I think we've seen the same in Kooltherm, that you kind of get rid of some of the older technology and this kind of partly a substitute and keeps you ahead of the game in terms of keeping your premium margin. If you could just, sorry, those are kind of the sort of longer-term piece questions. In terms of numbers, could you just remind us where we are now and sort of separately the chemical and the steel build so we can get a bit of a sense where things ended up? That would be helpful. Thank you.
Okay, Gregor, thanks for that. Yes, the AlphaCore project is traveling along broadly to plan. This, as you point out, will be a non-fiber alternative to the so-called non-combustible category. The development should see us at least soft launch a product towards the latter half of this year, and then in earnest next year. As we've pointed out before, this is pure R&D, and it'll be a first iteration of our development into this non-fiber Class A category. We'd expect that to lead to, as I say, other iterations down the track. I think we'd expect it to be a low volume production item and a relatively high-cost production item for the near term. Its key advantage over mineral fiber, of course, will be its thickness.
We expect the thermal properties of this to be broadly in line with PIR, so something close to half the thickness of fiber. At the get-go, at a significant premium, just by its very nature because it's very new material. The QuadCore that you asked about, versus our existing material, it's about 15% better on thermal. Although our existing PIR insulated panels in particular have exceptionally high fire performance, the QuadCore brings that up to a different level once again, which we talked about while we were on the slide. There is, of course, some internal substitution. There's no doubt about that, but that's at a premium margin, of course. We'll encourage that all day long. We'd expect about 50%, as I said, of the total panel business to be QuadCore by 2025.
Just on raw materials, Gregor. For us, as we said before, in very broad terms, raw material moves are a pass through for us with a lag in both directions. Very directionally, our steel bill is a little over EUR 1 billion, and our chemicals in one shape or form are approximately EUR 700 million, but they're very directional numbers.
Thank you very much.
Very well.
Next question comes from Arnaud Lehmann from Bank of America. Arnaud, your line is now open.
Thank you very much. Good morning, gentlemen. My first question, I guess a follow-up from Gregor on Kooltherm and QuadCore. It sounds like you want these products to be a very large part of your business in the medium term. Could we have a feel for the margin gap with your existing business? I appreciate you don't want to be too specific, but as you increase the penetration of these products and you replace some of your traditional PIR volumes, what is the margin potential driven by this penetration? My second question is, if you could give us a little bit more granularity on your acquisition pipelines. Shall we expect bolt-on acquisitions in your board and panels businesses in Europe? Are you looking at potentially slightly bigger deals in your, let's say, new products around industrial insulations or waterproofing?
Okay, Arnaud. Thanks for that. I think you'll appreciate it'd be a little bit sensitive to get too much into pricing or margin premiums for the shift to QuadCore and Kooltherm. I suppose our primary aim, first of all, is to protect what we have. We already have healthy margins in our board and panel businesses. That's our primary ambition, is to make sure that we're a step or two ahead of the market at all times to protect that. You'd have seen the pattern over the last two to three years of margin expansion in those businesses, and that's largely as a result of the transition to those materials. I hope that answers that. From an acquisition perspective, I'd say bolt-on and medium-size is what our focus is.
Of course, every now and then we come across a gargantuan prospect, so far we haven't been tempted into that zone. Everything we're looking at is bolt-on to medium-size and very absorbable. You mentioned panels and boards, of course, that's key to us, further consolidation of those markets will be a primary focus of our M&A agenda. Also our Light & Air business is focusing on a number of opportunities that we'd hope to land this year as well. We set it a short-term target of getting that to around EUR 500 million revenue. What we're looking at right now would at least take us to that in the near term. They are the three business areas that are going to be getting the primary M&A focus.
Thank you very much.
Next question is from Yassine Touahri from On Field Investment Research. Yassine, your line is now open.
Yes. Good morning, gentlemen. A couple of questions. First, on your inflation, you kindly commented on the inflation for chemical. Could you give us a bit of color on what you've seen in 2019 for steel, and what would you expect for 2020 in terms of steel deflation or inflation? I think you were very helpful in commenting a little bit about the margin prospects for your board business. Could you give us a little bit of color on what you see for your panel business? My last question would be on regulation. The European Commission has announced a Green Deal in December of last year. How do you think this could impact Kingspan business? I think in this Green Deal, there is a substantial focus on improving the existing buildings.
What kind of offering do you have, and what kind of marketing offering could you develop to address the renovation of building in Europe?
Okay, Yassine, thank you very much for those questions. I'll just deal with a couple of them first. From a steel perspective, we saw steel deflate somewhat last year. That continued actually into the fourth quarter. The steel industry is, I suppose, attempting to harden their price and potentially get it up in Q2. We're obviously very mindful of that. At the same time, with one eye on demand, I think it's feasible that steel doesn't actually succeed in inflating in the second quarter because general industrial demand, as we talked about earlier, is under some pressure. From a regulatory environment perspective, it's improving, it's not anywhere like what you'd expect out of the global climate talks that have happened successively.
It's moving in the right direction, but there's nothing we could point towards that's very solid that's going to significantly move the dial for Kingspan in the short term. Obviously the general direction of travel is good. From a renovation perspective, the business is very focused on that. It's really only about a quarter or less of our activity. Our products are totally suited towards that, and if the codes do change, we'd expect them to change most significantly in terms of upping the renovation for opportunities. Because as we keep saying, if emissions are to be reduced from buildings, they have to be reduced from ones that exist, not ones that don't exist yet. If governments are serious about this, then the renovation agenda will come much more to the fore.
The last one was on the margin. Yes. On the margin for the insulation panel, and maybe do you have a view of where you would like to be medium term as well?
Well, just on the panel margin itself, we added 40 basis points to it in 2019 to 10.4%. The driver of panel margin would be a function of many things, including geographic mix, product mix, the impact of acquisitions which were made in 2019, and so forth. It's very difficult to be specific to within 10 basis points. I think given the mix of activity that we have, it'll be somewhere between 10% and 10.5%, depending on all of those factors. More medium term, our medium term is 15% return on capital employed. Our pricing will reflect that, but I think our margin profile in panels over the medium term will be similar to current levels, which is in that kind of early tens type area. I mean, for us, it's all about achieving two things.
We value returns and growth. We're trying to convert elements of the market away from traditional materials. That volume piece over time is every bit as important as pricing. From a modeling perspective, you can model similar margins in pounds as currently.
Thank you very much.
We have another question from Robert Whitworth from Exane BNP Paribas. Robert, your line is now open.
Thank you. I just wanted to start with a follow-up on the M&A theme. Where do you stand on Recticel, given where the share price is currently? Would you consider this acquisition in the future? I guess also just as a follow-up, are you prepared to pay above your historical deal multiples to penetrate new verticals as well? Thank you.
Just on the Recticel, we haven't revisited that at all. We'd always remain open to, it's a very fine business, but it's not currently on our agenda at all. I can answer your second part. We're not changing our returns aspirations up or down. We've a fairly fixed view on that, which has served us well in the past, and we're going to stick to that.
Okay. Thank you.
The next question is from Brijesh Siya from HSBC. Brijesh, your line is now open.
Thank you. Good morning, guys. I have three questions, if I may. First one is, if I can go back to your order book outlook. You talked about January was visibly weak and that improved in the four weeks to February. Can you just give us on broad sense of globally how the panel order book looked like in January and how it is looking like now? That one is first. The second one is coming to the QuadCore, there's an improvement, strong volume growth happened from 36% for the full year. If I look at first half was around 42%, that implies second half is slightly slowed down.
Am I reading a little bit too much into it, or is there any specific, like the U.K. decline had a largest impact that's why the growth was kind of slowed down to 30% in the second half? The third one is on your carbon reduction target, which you talk about 50% reduction in the supply chain. Does that include somewhere how the MDI emits carbon or steel emits carbon, or it's just on the other part? A little bit more clarity on that would be helpful. Thank you.
Sure. Okay. Just to deal with the question around the order book. Without wanting to go into too many specifics on individual regions, we flagged in our November trading statement that the area that we were seeing pretty acute weakness in terms of order book and intake was the U.K., where we were down mid to high teens in the latter end of last year. Naturally, we're harvesting the far side of that now in terms of sales out the door in the early part of this year. As Gene mentioned earlier, we have seen order intake in the U.K. improve in recent weeks. What all that will mean, we would feel by Q2 is from a volume perspective, our global panels order book will be low single-digit volume growth when you take the mix of geographies that we have running at different speeds around the world.
As regards our growth levels in both Kooltherm and QuadCore, they're very much intact and on track. Kooltherm volumes actually grew by 15% during 2019. QuadCore, as we've mentioned earlier, the medium-term plan is that it'll comprise 50% of our global insulated panel sales, and grew by 36% in absolute terms in 2019. That agenda is very much on track.
You asked about the carbon reduction targets from our suppliers. Yeah, as I pointed out there, that's probably the most demanding of our targets because it's not directly in our control. Yes, absolutely it's our MDI and steel suppliers primarily are the ones that are going to be focused on. Both of those are reasonably consultative. On the MDI side, it's obviously petrochem based in the first place. Yes, they are long-term projects. I would just say that those industries realize the requirements, and are receiving that kind of demand quite positively. We ought to just be cautious in terms of timescales here. Nothing can change overnight, but the industries are receptive, and we'll be putting in place initiatives to address their own carbon.
Thank you.
Great.
The final question comes.
Final question.
Yes. We have another one from Rajesh Patki from JP Morgan. Rajesh, your line is now open.
Yeah. Good morning, all. You've commented fair bit on your European operations. If you can provide us some more color on trading in the Americas, in the U.S., but also in the LATAM markets. How are the acquired businesses performing there?
Okay, Rajesh, thank you for that question. The North American markets for us last year was at an excellent outturn, actually. Like everywhere, it was a little bit slow in January, but order intake has notably improved actually in the last couple of weeks. We'd be positive on North America for at least the first half. It's always as far as we can see. In Latin America, we've been growing organically at quite a pace over the last two years in our Kingspan Isoeste joint venture, particularly in Brazil. We're present, as you know, in Colombia and Mexico as well. Those businesses are somewhat smaller, but the Brazil side of the coin is where most of our focus is going to be in the near term. As I said, between last year and next year, we'll have built three totally new facilities.
That gives you some indication of the demand we expect from that out.
Great. Thank you.
Okay. You're all very welcome, and thank you for joining the call, and no doubt we'll be speaking to each other over the next few days. Thank you.
Morning.