Trading statement warns of much lower operating profits at US flooringsubsidiary Tate

The chief executive of building materials group Kingspan, Mr Gene Murtagh, has expressed disquiet about unusually heavy trading in the company's shares a day before a trading statement yesterday warned of substantially lower operating profits at its Tate flooring subsidiary in the United States.

On Thursday, more than 4.3 million Kingspan shares were sold as the stock fell 30 cents to €3 (£2.36). The trading statement from Kingspan yesterday knocked another 30 cents off the shares and it closed on €2.70.

Asked about the heavy trading ahead of the trading statement, Mr Murtagh said: "We don't like it and we're looking into it and we have asked our brokers to look into the situation," adding "It certainly wasn't me."

A spokesman for the Irish Stock Exchange would not comment specifically on the Kingspan share dealings but said: "As a matter of policy, the exchange looks into unusual trading patterns around the time of the release of price-sensitive information."

While Kingspan said it was comfortable with forecasts for the year to the end of December, it warned of serious difficulties at Tate and said it had intitiated binding arbitration against the former owners of Tate relating to warranties they had given in relation to orders which subsequently failed to materialise. It is understood a former senior executive of Tate has joined a competitor, Maxess - a subsidiary of the Japanese group Hitachi.

Since then, Maxess has won a number of major contracts at prices that Kingspan does not believe are sustainable.

"Tate had been confident of winning these projects, which were Tate specifications in 2002," Mr Murtagh said, adding that Maxess had won the contracts on "crazy prices".

He added that Kingspan had decided these contracts would not be easily replaced and warned that if the trend was maintained over the rest of the year, operating profits at Tate would be some €15 million lower than previous expectations.

In the meantime, Mr Murtagh said Tate had begun a major marketing initiative aimed at "converting a substantial part of the commercial office construction market to raised access floors and to utilise the product in other sectors in a way that would differentiate Tate from its competitors".

He added that Kingspan believed this initiative would have a positive impact on 2003.

Kingspan paid $120 million (€140 million) for Tate a year ago.

At that time, Kingspan said Tate generated sales of $109 million in the year to May 2000 with pre-tax profits of $10.9 million.