Kingspan warns of ‘challenging environment’ despite record profit

Revenue at Cavan-based insulation specialist Kingspan reached €4.1 billion in the first six months of this year, and trading profit amounted to €436 million, edging slightly ahead of the record achieved in the same period of 2022.

The company said on Friday the first half of 2023 had been “relatively pleasing ... given the somewhat challenging environment we were confronted with”.

“In contrast to recent years, deflation has been a prominent theme as has been destocking of our inventories which boosted the strong cash generation in the period,” it said in its interim report.

Similar to the trading backdrop reported in the 2022 full year, conditions varied considerably by market and by end segment.

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The Americas, and the US in particular, performed “exceptionally well” for the group as insulated panels delivered growth. Europe was more mixed with “predominately weaker” new-build activity and refurbishment “suffering somewhat due to the current interest rate environment”.

Group revenue was down by 2 per cent and profit was up modestly on the €434.2 million generated in the same period last year.

The company said the numbers represented a 0.7 per cent decrease in sales and a 1.4 per cent increase in trading profit on a constant currency basis.

Group operating profit increased by 2 per cent to €414.9 million, reflecting a combination of a higher amortisation charge this year and a non-trading item of €16.1 million recorded last year.

Profit after tax was €324 million compared to €319.9 million in the first half of 2022. Basic earnings per share for the period were 175.2 cent, an increase of 3 per cent on the first half of 2022.

In a note to investors Davy analyst Flor O’Donoghue said the headline figures “would have appeared highly unlikely” at the turn of the year, adding they “represent an excellent performance in a testing environment”.

“We do not expect to make material changes to full-year forecasts that were revised upwards last month,” he said. “After the July update we increased our 2023 trading profit forecast by 9 per cent to €870 million. This is based on a 6 per cent year-on-year fall in organic revenues, mostly offset by the net mergers and acquisitions/foreign exchange effect, and a trading margin of 10.6 per cent. While we will tweak our forecast model, we expect little net change to headline estimates.”

Kingspan’s finance costs for the period were higher than the same period last year at €22.1 million, up from €17.6 million. That includes a non-cash charge of €400,000 relating to the group’s defined benefit pension schemes.

The board declared an interim dividend of 26.3 cent, up from 25.6 cent on last year, payable on October 13th.

Looking ahead Kingspan said its order intake volumes in recent months have been trending “positively overall” versus the same months last year, “albeit with less demanding comparatives as we trade through the second half”.

“Raw material pricing, which experienced some level of inflation in the second quarter, could see some deflation in the third quarter,” it said. “The group’s balance sheet is strong, which is important given the backdrop of a strong development pipeline.”

Kingspan chief executive Gene Murtagh said he was “pleased with a strong first-half performance in a testing environment”.

“This year the harsh reality of climate change has become an everyday reality for many, intensifying the urgency to deliver meaningful and increasingly smart decarbonisation solutions,” he added.

Separately, Kingspan announced that the listing of its ordinary shares on the London Stock Exchange has been cancelled.