Kingspan upgraded after ‘eye-catching’ quarter

Analysts have upgraded their earnings and revenue forecasts for Kingspan on the back of an “eye-catching” first quarter performance from the Co Cavan-based specialist building materials firm.

The insulation and energy -focused building group yesterday reported a 24% rise in first-quarter revenues to €831.2m, prompting both Davy Stockbrokers and Goodbody Stockbrokers to up their full-year forecasts for the company.

Davy noted the “eye-catching” 14% annualised rise in organic revenues for the quarter. The stronger-than-expected start to the year also saw 12% revenue growth coming from acquisitions, with Kingspan saying new buys were “bedding down well”.

The group said in its latest quarterly trading update – which coincided with its AGM in Dublin yesterday – that all of its divisions recorded strong revenue growth in the first three months, led by a 32% annualised increase in the core insulated panels arm. On a geographical basis, mainland European markets continued to show signs of recovery and conditions in the US showed a pick-up since the end of last year.

While the UK remains solid, management said trading there has become “a little softer” since the turn of the year and is trending weaker.

“A feature of all markets has been ongoing raw material inflation and the associated recovery effort”, Kingspan said, saying its order backlog points to a solid first half and its project pipeline is encouraging in most of its major markets.

However, it said its key trading priority is to pass on input costs, with the consequences of this likely to be first-half profit growth being lower than revenue growth.

It is the tenth consecutive instance of Kingspan being upgraded on the back of either a trading update or set of earnings. Davy said it is likely to increase its full-year revenue forecast, for Kingspan, from €3.48bn to around €3.6bn and nudge up its trading profit outlook by 2% to around €365m.

“At a time of significant input pressures, an upgrade is testament to the resilience of the Kingspan model,” said Davy’s industrials team of Flor O’Donoghue and Michael Mitchell.

Robert Eason at Goodbody said that despite talk of weaker trading trends in the UK, he was still comfortable with raising full-year trading profit forecasts by 2% to 3% to €369m.

“In most of its other markets the pipeline is “encouraging”, with continuing signs of recovery in mainland Europe and more positive signs in the US and Australia,” Mr Eason said.

“While like-for-like sales growth will have benefited from the timing of Easter and buying ahead of price increases, the double-digit growth achieved in the first quarter needs to be put into the context of the period having the most difficult year-on-year comparatives from 2016,” he said.

Despite Kingspan’s share price dipping by nearly 2% yesterday, the group said it remains well-positioned.

Management didn’t update on acquisition targets, but recently suggested it remains on the look out for further purchases in north America and mainland Europe, but remains concerned about valuations being placed on certain targets. The group has spent around €700m on acquisitions in the past two years but could still comfortably spend €500m without damaging its balance sheet.