Goodbody ups Kingspan shares from ‘add’ to ‘buy’

By Geoff Percival

Tuesday, November 17, 2009

KINGSPAN has seen its share recommendation upped from ‘add’ to ‘buy’ by Goodbody Stockbrokers, on the back of the Cavan-based building materials firm issuing a better than expected trading update for the past four months.

While the group, which specialises in insulation products for buildings, is not anticipating widespread improvement in performance until 2011, it said yesterday that overall trading, to date, in the second half of the year has been steady and that operating profit for the full year should come in at €60 million.

"With the exception of western Europe, construction markets remain under significant pressure and, in particular, the non-residential sectors in central and eastern Europe and North America have both noticeably contracted in recent months.

"These markets are not anticipated to bottom out for some time yet," its statement said.

It added that, across the group, volumes since the halfway stage of the year are "firmer" than in the first six months, "with the momentum continuing into quarter four".

"In total, group revenues on a constant currency basis in quarter three were down 28% on the prior year, a slight improvement on the year to date figure, which is down 29%.

"Overall, quarter three sales are up 5% on quarter two," the statement read.

In a responsive research note, Robert Eason of Goodbody Stockbrokers, which has already estimated full-year operating profits of around €56m for Kingspan, said: "The pace of sales decline is moderating, with the key drivers being insulated panels in Britain and Ireland, insulation boards and environmental and renewables.

"As expected, market conditions for the raised access floors business has deteriorated, a reflection of the late cycle nature of the business. Given the update and increasing comfort over the cycle, we are upgrading our forecasts."
Kingspan said that it managed to reduce its net debt by around €110m during the year, bringing it down to €190m by the end of October.

It also said that its full-year capital expenditure for 2009 would amount to around €50m.

"In general, it’s anticipated that the building environment will remain challenging during 2010. High rise is expected to weaken and low rise commercial is expected to remain weak but stable, while residential is showing some signs of recovery," Kingspan’s statement added.

This story appeared in the printed version of the Irish Examiner Tuesday, November 17, 2009