Cantillon: Kingspan to bed down current purchases

Running a business whose products are focused on helping customers to save energy may not be very appealing against the background of low oil and natural gas prices, but Kingspan chief executive Gene Murtagh remains relatively sanguine about the insulation manufacturer's prospects.

“We’d prefer if oil was $100 a-barrel,” he acknowledged after the group released its preliminary results for 2014 yesterday. However, he pointed out that his business takes the long view.

That shows that energy costs have gone up over the past 20 years, despite lots of periods of volatility.

That pattern suggests that they are likely to continue doing so.

At the same time, politicians in many of its markets are continuing to introduce legislation designed to regulate consumption and promote energy efficiency, which has obvious pay-offs for a company that manufactures insulation products.

“Even if oil is $1 a barrel, that’s going to continue,” he said.

Given the results that it posted yesterday, which showed trading profit up 21 per cent at €148.5 million, it does not look likely that energy prices are going to hinder Kingspan’s immediate progress.

Regulators permitting, the company should be able to complete the already announced Joris Ide and Vicwest deals within months. They will involve a combined outlay of more than €400 million. At the end of last year, net debt stood at €125.5 million, a ratio of less than 0.7 times earnings.

Once they are completed, the two deals are likely to push that ratio up to about two times earnings, but Murtagh said that this is likely to drop to about 1.6 by the year’s end.

Kingspan has always tended to err on the side of safety when it comes to managing its debt, a policy that helped it weather the recession.

It seems clear that it intends to stick with this approach, as Murtagh said that it will rein in its acquisition activity until its latest purchases are bedded down.