Kingspan operating profits to fall by 60% this year to €60m

OPERATING PROFITS will fall by about 60 per cent this year at insulation and building materials specialist Kingspan, according to a statement from the group yesterday.

Kingspan said that stabilised sales and cost-cutting would yield operating profits in the region of €60 million for 2009. The group had operating profits of €157 million last year.

Cost-cutting generated €60 million in savings this year. The group added that it is seeking further reductions in a small number of regions.

The Cavan-based company manufactures insulated panels, flooring and environmental products in Ireland, Europe, the US and Australia. It depends mainly on new building and renovation for sales.

In a statement, the group said that strong cash flows throughout the year allowed it to cut debt by €110 million to €190 million, but added that this is unlikely to change much for the rest of 2009.

Capital spending will be in the region of €50 million, largely down to the completion of its Kooltherm insulation facility in the Netherlands and the Thermonax solar tube plant in Northern Ireland. It estimates that it will spend €25 million in 2010.

Sales volumes indicate that Kingspan’s key markets are beginning to stabilise. While product sales fell across all ranges and countries in the first half, they began to recover ground between the end of June and September.

Construction markets were still under “significant pressure”, the firm said, with the exception of western Europe.

The non-residential sectors in central and eastern Europe and in North America have contracted in recent months, Kingspan said, with little hope that these would bottom out for some time yet.

The company said the building environment is expected to remain “challenging” during 2010, with a weak commercial sector. However, the residential sector is showing signs of recovery, it said.

Davy stockbrokers’ analyst Flor O’Donoghue said that Kingspan’s profit forecast was in line with market expectations but it was cutting debt at a faster rate than expected. Davy forecast that Kingspan would end the year with €215 million in net debt, instead of the current figure of €190 million.