Profits boost but Kingspan stays cautious

The Irish group, which competes with Sheffield insulation company SIG, said pre-tax profits in the first six months of the year increased 37 per cent to 29.2m euros (£25.3m).

A leading producer of insulation in Britain, Ireland, Canada and Australasia, Kingspan said operating profits were up 26 per cent at 41.7m euros (£36.5m). Analysts had expected Kingspan to report operating profits of 40m euros.

“During the first half of 2011, penetration growth, rising refurbishment activity and geographic expansion all combined to drive the business forward,” said the company.

“The pace of growth, however, eased during quarter two and is likely to ease further in the second half reflecting the limited evidence of a sustained recovery in the group’s key markets.”

Kingspan said revenues hit 736m euros (£643.6m), with growth in all divisions except its “access floors” arm, which is linked to the new-build office sector.

The group generates just five per cent of its revenues from Ireland’s battered economy. There, it saw sales volumes of insulation boards slide 16 per cent and said the market remains subdued, with some resilience shown by the refurbishment market.

In the UK, Kingspan’s sales volumes of insulated panels grew by 16 per cent. Late last year it bought building materials group CRH Insulation Europe.

Chief executive Gene Murtagh said: “Kingspan has had a good first half in 2011 with strong organic growth complementing our recent acquisition which will bring even greater balance to our mix of geographies and products.

“Kingspan continues to outperform both the market and the general macro environment with our range of high performance solutions although we remain very mindful in the period ahead of renewed global uncertainties and their possible impacts.”

SIG, due to report first half numbers on Thursday, said last month it expects underlying profits for the first six months of 2011 to double to about £34m. It said this reflects strong sales growth at stable gross margins – thanks to now having a leaner cost base.

SIG’s total revenues are due to have increased by about nine per cent to £1.4bn, with like-for-like sales up 10 per cent. Its strong performance was boosted by beating the market in mainland Europe, plus forcing through “moderate” price inflation.

SIG was also up against weaker numbers in the UK, Ireland and mainland Europe in the first three months of 2010, when freezing temperatures and heavy snowfall hampered building projects.

Like its peers, Kingspan has faced higher raw material costs this year and Mr Murtagh said the group was able to recover most of the increases in steel and chemicals through price hikes, and would push the rest through in the third quarter.

“This is a good set of results from Kingspan. Organic revenue growth was an impressive 16 percent in the first half, suggestive of market share gains,” said analyst Flor O’Donoghue from Davy Stockbrokers. “Kingspan’s outlook comments unsurprisingly suggest management is flagging a slowdown in the pace of growth in the second half.”

MAKING ITS MARK ON SCHEME

Kingspan supplied the 90-acre Prologis distribution park in Bradford with building materials. Its structural products division supplied 96,000 metres of its purlin and rail system, Multibeam, for retailer Marks & Spencer’s 1.1m square feet distribution centre.

The facility was built on the site of the former West Bowling Golf Club, in a joint venture between Marks & Spencer and developer, ProLogis. Kingspan’s Multibeam product minimises steel content and is packed using low carbon mild steel, recyclable banding, biodegradable paper labels, and ethically-sourced softwood bearers.

The M&S site supplies stores with furniture products and shop equipment. Barrett Steel, in Bradford, was the scheme’s major steel supplier and Wells Spiral Tubes, Keighley, provided water storage and drainage.