Kingspan shares surge 10% on Brexit outlook

By Eamon Quinn

Shares in Kingspan, the Co Cavan-based international building products firm best known for its insulation board, have leaped

10% after its earnings suggested it was insulated from any Brexit fallout from its major market in Britain.

The shares surge instantly added about €700m to almost €7.58bn in its market value. And its single largest shareholder, non-executive chairman and founder Eugene Murtagh, who through his 29 million shares owns 16% of the firm, saw his paper worth jump by around €100m to €1.24bn.

The paper wealth of his son, longstanding chief executive Gene Murtagh, with 1.28 million shares, also rose significantly on the shares surge. The results for the first six months, which easily surpassed market expectations, showed the firm was so far weathering the Brexit-driven headwinds of a weaker sterling. This despite the UK currency having fallen sharply against the euro to an average 88p in the reporting period from 86p a year earlier.

For Kingspan, every 1c move in the exchange rate can reduce or add about €1m to its bottom line. That has meant that shares in Irish companies such as Kingspan, with large exposure to sales in the UK, have suffered since the UK’s summer 2016 referendum.

Kingspan relies less than it did on the UK but Britain, with around €500m in sales, still accounts for about a quarter of the €2bn global sales Kingspan generated in the first half. For Kingspan, the surge in the shares points to a lessening of those fears, reinforced by the company reporting “a robust” performance in Britain despite the political turmoil in Westminster surrounding the country’s Brexit plans. Boosted by acquisitions, but also by underlying growth, its trading profit rose 10% to €195.3m on revenues that climbed 15% to €2bn at the half-way stage.

Its two major divisions are insulated panels and insulation boards. Between them, they accounted for almost €1.7bn in sales in the period posting growth of 14% and 15%. Gene Murtagh identified three key platforms behind the increases.

After “a very poor start” from the severe winter weather in northern Europe and north America, pent-up demand had put its order book in good shape for the current third quarter; while underlying growth and acquisitions had further bolstered sales, he said.

Kingspan wasn’t averse to executing any single large acquisition of up to €1bn but there were no opportunities currently and the firm will continue to focus and build out in mainland Europe and north America with smaller acquisitions, the CEO said.

Having spent around €260m on acquisitions in the six months, Mr Murtagh said the acquisition strategy “will be progressive and incremental”.

“I do not anticipate that there will be a major step up in acquisitions,” he said.

Mr Murtagh said price rises for a key chemical ingredient it uses to make insulation board in Kingscourt in Cavan and other facilities around the world had weighed on the underlying trading profit of the insulated panels business but said t the adverse effect would be shortlived. He said the UK economy was weathering the Brexit storm.

“The potential for a full-on hard Brexit as originally envisaged is dwindling. It is very much a personal view, we would not be planning around [any particular outcome] because it is so unpredictable,” he said.