Kingspan looks to expand amid 'greater stability'

INSULATION SYSTEMS and building materials specialist Kingspan is eyeing future acquisition opportunities after stabilising its business through the first half of the year.

The Cavan-based company develops and manufactures insulation products and systems for buildings. Its markets include Ireland, Europe, the US and Canada.

The group’s sales and profits have fallen as global construction slumped over the last 18 months.

Kingspan yesterday reported that sales were down 35 per cent to €552.5 million in the first six months of 2009 from €850 million during the same period last year.

Operating profits were down two-thirds this year at €30.3 million from €90 million. Operating margins halved to 5.5 per cent from 10.6 per cent.

Chief executive Gene Murtagh said yesterday that the group has cut fixed costs by €60 million over the last 18 months, helping to offset the decline in sales.

At the same time, what the group described as “a sharpened focus on cash management” cut net debt by €68.8 million, despite a €28 million capital spending bill during the first half.

“We are seeing greater stability in the business,” Mr Murtagh told The Irish Times yesterday.

“Things are at a low level, but we are not looking down a hill any more.

“We are looking at opportunities now. There is nothing imminent, but there are businesses we would like to own that will almost certainly become available in the longer term,” he said.

Kingspan’s statement said that its focus for now will continue to be on generating cash and making further progress on cutting debt to ensure it has a balance sheet strong enough to allow it consider acquisition opportunities when they arise.

Last year, it bought Metecno, the second biggest insulation panels manufacturer in the US, for €75 million. Mr Murtagh said yesterday that the business has been successfully bedded into the group, which is working on, as far as possible, integrating its US and Canadian operations.

Earnings per share at Kingspan were down 70 per cent for the six-month period at 12.3 cent from 41.4 cent during the first half of 2008.

The directors are not proposing to pay any interim dividend. Shareholders received eight cent per share after the end of the first half of 2008.

Of its individual markets, Ireland showed the sharpest fall in sales, dropping 61 per cent to €39.8 million in the first half of this year from €101.8 million during the same period in 2008. UK sales were down 44 per cent at €253.5 million, Europe was down 29 per cent at €144.3 million, while the Americas were up 45 per cent at €100 million.

In its outlook, Kingspan said the market for its products remains less buoyant than last year, but absolute demand had stabilised.

Looking ahead to next year, it said the level of planning applications internationally indicates that any improvement in the near-term is “unlikely”.

Stockbroking firm Davy said that the results were better than expected. The brokers had forecast earnings per share of about nine cent for the period, and pointed out that that actual outcome was “comfortably” better than that prediction.