Kingspan eyeing more European and North American acquisitions

Kingspan is eyeing more European and north American acquisitions as it seeks further growth on the back of a year of record revenues.

The Co Cavan-based international specialist building materials group yesterday beat its own and analysts estimates by reporting a 33% rise in trading profit, for 2016, to €340.9m and revenue growth of 12% to €3.1bn. Management had eyed revenues of around €3bn and a 30% rise in profit.

On an operational basis, the core business of insulated panels drove growth as expected, with a 17% rise in turnover to €2.1bn and a 38% increase in trading profit to €228m. Growth was also evident in the access floors, insulation boards and environmental areas.

Ireland represents 4% of total group revenues. It was notably strong and is likely to remain so for the foreseeable future, said the company. North American revenue was slightly ahead, but subdued in the second half and strong growth was evident in key areas of mainland Europe such as Germany, the Netherlands and the Nordic countries.

Kingspan’s UK building supplies sales have risen since last year’s Brexit vote and had a “particularly strong finish to the year,” according to chief executive Gene Murtagh.

He said there remains substantial demand for residential building in Britain and any pending slowdown in commercial activity is expected and shouldn’t be blamed on Brexit. He said it remains too early to know if Brexit will be positive or not.

“It seems to be a foregone conclusion that Brexit is going to be negative but I’m not sure that will necessarily be the case. We’ll know when it gets to the end,” he said.

Kingspan’s UK insulated panels orders are “comfortably ahead” of this period last year.

On the US, Mr Murtagh said Kingspan is still in a wait-and-see period on what the new administration will do regarding the construction sector. While many flagged projects are outside of the company’s operational interests, Mr Murtagh said any stimulus measures should also feed into the broader residential sector.

Kingspan finished 2016 with cash reserves and undrawn debt of over €680m. Having already spent around €700m on acquisitions in the past two years, Mr Murtagh said that Kingspan could still comfortably spend €500m on purchases this year and has an active pipeline of opportunities in mainland Europe and north America.

Kingspan’s management remains upbeat on prospects for the first half of 2017 at least.

“We are encouraged about the outlook for the first half of 2017, with the current order book solidly ahead of the same point last year.

With low debt levels and strong cash generation we retain the flexibility to invest in new opportunities as they present themselves,” said Mr Murtagh.

Kingspan shares were down marginally yesterday at around €29.40, but are still up 14% this year and near a new milestone of €30.

While Davy and Goodbody yesterday talked about upgrading their profit forecasts for Kingspan by 2% this year, Merrion lowered its price target and estimates for the stock and voiced caution ahead of market reaction to more ‘hard’ Brexit talk.