Kingspan profits increase 34% to €83.4m

Kingspan posted bumper first-half results yesterday, sending its shares nearly 9 per cent higher and prompting a round of analyst upgrades. Pretax profits at the Cavan-based firm were up by 34 per cent at €83.4 million, while sales climbed by 16.5 per cent to €675.9 million.

The growth was drawn from the company's five divisions, all of which are benefiting from an increased focus on energy efficiency in construction.

Kingspan chief executive Gene Murtagh said the performance to the end of June represented a "tremendous outcome" for the group.

He looked to "substantial earnings growth" for the year as a whole, helped by continuing regulatory change in the building materials sector.

The operating margin for the first half climbed from 11.5 per cent to 13 per cent. Mr Murtagh said "similar momentum" should come in the second six months of the year although he warned that margins would decline over the next few years.

The highlight for the group over the first half was its established insulation business, where panel sales were up by 17 per cent and board revenues climbed by 10 per cent year on year.

Mr Murtagh said the performances were the result of considerable capital investment over the past few years. In panels, sales were ahead by 11 per cent in the UK, while revenues in the Benelux region were up by 33 per cent.

Central and Eastern Europe saw organic growth of more than 30 per cent in the same division, with Mr Murtagh signalling Kingspan's intention to expand operations, particularly in the Czech Republic, over the next year.

The company already sells into 11 countries in Eastern Europe and is looking at expansion in Bulgaria and Turkey.

The Republic is also performing well, the firm said.

Boards accounted for 17 per cent cent of Kingspan's sales over the half, with the group expecting new British building regulations to boost this business over coming years. It is planning "substantial capital investment" in the area, in part to address growing competition from companies such as Quinn Group.

Higher energy awareness also helped Kingspan in its offsite and structural businesses, led by timber-frame subsidiary, Kingspan Century. Sales here were ahead by 17 per cent, with regulatory changes again expected to reinforce future growth.

The group's environmental containers business delivered 18 per cent of turnover in the first half, with sales again up by 17 per cent. The group is looking at expanding the division in Scandinavia, where it increased sales last year. Mr Murtagh said the group was also examining entry to the US with its containers, with an initial move also likely to focus on panels. He hinted that a US acquisition would probably be sought.

This follows the purchase of an Australian panels company earlier this year, while the Competition Authority continues to mull the group's €87 million purchase of Leanort, an insulation business.

The group's shares finished €1.17 higher at €15.35, as analysts raised their end-year price targets to at least €16.