Kingspan shares soar as it predicts record first-half profits of €435m

Shares in Cavan-based insulation specialist Kingspan soared almost 16 per cent on Tuesday after it said it expects to report record profits for the first half of the year.

The group, which will publish its interim results on August 18th, said in a note to investors that it expects to report a profit in the region of €435 million, marginally ahead of the €434 million reported for the first half of 2022.

It said market and category performances have “varied widely”, with the Americas overall outpacing European activity. Certain applications are “performing strongly”, particularly those seeking “ultra energy efficiency” and lower carbon in categories such as tech and automotive production.

It said the demand for data applications “remains strong”, with artificial intelligence projects an emerging feature.

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The residential sector worldwide was described by the company as “subdued” in a higher-interest-rate environment, although the underlying need for housing “appears strong” in most markets.

The group said it is “positioned favourably overall” as it enters the third quarter, although it noted it is “still early days”. Its development agenda and pipeline was described as “encouraging”. Kingspan added it is “positioned strongly overall” for the medium term and beyond given the global focus on energy efficiency.

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The trading update was positively received by investors and brokers. Goodbody head of industrials research David O’Brien said the broker was upgrading its full-year trading forecast by 8 per cent on the back of the “unscheduled update”.

“Management had previously guided trading profit for the first half of just over €400 million,” he said. “We believe the delta relative to prior guidance is likely to be more top-line than margin. The group is positioned favourably as it enters the third quarter, and the development pipeline is encouraging.”

He said the “welcome trading update” would be one that will be “well received” given the derating the stock has experienced against an uncertain macroeconomic backdrop.

“Having performed well against the toughest comparative in the second quarter and [the] good momentum behind the group, we are upgrading our full-year trading profit forecast to €870 million, an upgrade of almost 9 per cent,” he added.

“While markets remain challenging, Kingspan has again demonstrated its quality to negotiate all trading conditions.”

[ Kingspan ‘committed to Dublin listing’ as it plots London Stock Exchange exit ]

Rival broker Davy also said it would upgrade its profit forecast for the group by 8 per cent. “In generally challenging construction end-markets, the strength of the Kingspan business is shining through,” it said.

“The group has upgraded profit guidance, which is a testament to the attractiveness of its products and an increasingly favourable sectoral exposure mix. We expect to upgrade our full-year trading profit forecast by over 8 per cent.

In its call following the update, Kingspan suggested that it can match the first-half performance in the second half. Hence trading profit forecasts for the year should push up to circa €870 million.

“We are currently at €800 million, implying a near 9 per cent upgrade to our existing estimate and a circa 10 per cent increase to the latest visible alpha forecast of €791 million.”