Kingspan eyes up Latin American push on back of latest annual growth

Kingspan has identified Latin America as the likely next step in its ongoing geographical expansion, with a presence in both Brazil and Mexico likely to be taken over the next few years.

On the back of a strong set of annual results — showing a fifth consecutive year of double-digit profit growth and a 6% jump in group revenues — management suggested to analysts yesterday that it is considering building a manufacturing facility in Mexico, but that such a move might not be for another few years or so.

Currently, Kingspan services the Mexican market from its base in Florida. That will continue to be the growth channel for Latin America in the coming year or so, with the building of a new greenfield plant in Mexico possible if that market shows decent growth.

However, chief executive Gene Murtagh said he would be “surprised” if the group did not have a presence, probably via acquisition, in Brazil within the next couple of years.

Brazil, along with North America and mainland Europe, is one of the territories Kingspan has been eyeing for growth over the past year or so.

The Cavan-based insulation products specialist has, in the last six months, carried out three large acquisitions via the building products division of Canadian group Vicwest, the building insulation arm of US player Pactiv and, more recently, the Belgian insulated panels group Joris Ide. Combined, the three represent a spend of around €486m. Of the three, only Pactiv has been completed, so the first half of this year will see Kingspan work on completing the other two transactions before embarking on a long and detailed group integration process.

Mr Murtagh suggested that, for that reason, further large-scale acquisition activity is unlikely this year, even though the group still has ample firepower for deals. Smaller bolt-on aquisitions have not been ruled out.

Kingspan’s share price jumped by nearly 8% yesterday, to €17.68 on the back of its results. They showed annual revenues of almost €1.9bn, a 21% jump in trading profit to €148.5m, and a 21% rise in basic earnings per share to 62.6c. Revenue and profit growth was seen in each of the group’s divisions, with 7% turnover growth (to €1.11bn) and 18% trading profit growth (to €89.2m) evident in its core area of insulated panels.

While some markets remain weak, the group saw positive growth signs in the UK and parts of mainland Europe, as well as in the Americas and Australasia.

Mr Murtagh said momentum seen at the end of 2014 has carried into the start of 2015, leading to expectations of a “solid” first quarter and a positive first-half showing for the current year.

“Conditions in our core markets are improving, and our activity pipeline, starting the new year, is encouraging,” he said.

Britain, North America, the Benelux nations, and Germany remain strong markets for the firm, while central Europe and further east are seeing more fragile and volatile conditions.

“Kingspan is in great shape. In many respects, 2015 will mark the beginning of a new era for the group,” said Flor O’Donoghue of Davy Stockbrokers.