Brexit uncertainty blamed for 6% fall in Kingspan shares

Insulation maker says UK orders down 15% but global strategy will secure company’s future

Gene Murtagh, CEO of Kingspan: “We will absolutely stay in the hunt for acquisitions.” Photograph: Cyril Byrne

Gene Murtagh, CEO of Kingspan: “We will absolutely stay in the hunt for acquisitions.” Photograph: Cyril Byrne


Brexit uncertainty will continue to squeeze demand for some of Irish insulation maker Kingspan’s products in the UK, chief executive Gene Murtagh believes.

Kingspan’s shares tumbled 6 per cent early on Friday, but clawed back some losses to close 4.05 per cent down at €35.695, despite news that profits rose 11 per cent to €377 million last year.

The group said that UK orders for insulated panels were down 15 per cent in the opening weeks of 2018 as result of a fall in orders from commercial and industrial building.

Mr Murtagh blamed uncertainty resulting from the UK’s decision to leave the EU for deterring investment in construction and predicted that this would last until Britain emerged from the “Brexit quagmire”.

However, he said that once certainty returned, there should be scope for construction in the UK to pick up again.

“If you take a 20-year view of the building market in the UK, right now it would not be anywhere near peak, it is normally past peak when a fall-off begins,” he said.

Demand for products in the UK, such as insulated boards, held up well on the back of residential building, said Mr Murtagh.

Kingspan said that revenues for 2017 grew 18 per cent to €3.7 billion from €3.1 billion the previous year.

Buying rivals

The group committed to spending a record €614 million on buying rivals during the year.

Of that it spent €174 million during 2017, entering new markets such as Brazil, Colombia and southern Europe.

In December it announced that it was buying Synthesia, an insulation board manufacturer with businesses in Iberia and south and central America, and Balex Metal in Poland. Earlier in the year it bought Isoeste Construction Isometrics in Brazil, Brakel Group in Holland and CPI Daylighting in Holland.

“We will absolutely stay in the hunt for acquisitions,” Mr Murtagh said. One area on which it is likely to focus is its “daylight” division, which makes skylights, canopies and other glass products.

Kingspan wants to develop this into a €500-million-a-year division. Mr Murtagh acknowledged that achieving this would require buying more businesses.

Net debt grew by €36 million last year to €464 million, slightly more than Kingspan’s earnings before tax and write-offs of €442 million.

Once Kingspan has completed the round of deals agreed last year and spent the balance of the €614 million that it committed, net debt should stand at around twice the group’s earnings, Mr Murtagh predicted.

Strong performance

He described 2017 as another year of strong performance for the Cavan-based group.

“We have continued our globalisation strategy with several significant acquisitions including establishing a market-leading position in Latin America, ” he said.

“Notwithstanding the weakening UK market, our well-diversified business is well-placed for the longer term,” he said.

Kingspan said that other markets remained in solid shape and pointed out that this, along with the new territories that it entered during 2017, should counterbalance the weakening UK building environment.

The group’s statement said that it had a slow start to 2018. Mr Murtagh explained that January is frequently an unpredictable month for Kingspan and noted that this year it was particularly poor. “February has improved a lot,” he added.