Irish building materials group Kingspan beat earnings forecasts and resumed dividend payments this week as firm orders defied fears of a slump back into recession in the UK, US and Europe.
Shares in Kingspan, the number one producer of insulation in Britain, Ireland, Canada and Australasia, were the top performer on the local bourse, rising 10 percent after it reported a nine percent rise in first-half operating profit, defying expectations for a 10 precent fall.
“There’s a fierce amount of negativity out there but it’s not evidenced in our order books,” Chief Executive Gene Murtagh told reporters in an interview.
“For the next six months there doesn’t appear to be any panic at all,” he said, adding that the group expected to pay a full-year dividend.
Murtagh declined to give specific full-year earnings guidance but said it would be disappointing not to at least achieve market consensus for full-year operating profit of €59m ($74.9m).
In 2007, at the height of the property boom, Kingspan generated operating profit of €230m.
Britain accounts for over half of group turnover and Murtagh said Kingspan had yet to quantify what impact public sector cutbacks in that country would have on its bottom line.
“The impact of austerity is really 2011,” he said.
Robert Eason, analyst with Goodbody Stockbrokers, said Kingspan’s strong performance in continental Europe and the US provided a cushion against UK cutbacks.
“It (British austerity) is absolutely a headwind but they are doing better than our expectations in other markets which is more than offsetting that,” said Eason, who raised his full-year earnings forecast by 10 percent after the results were published.
H2 orders at slower rate than H1
Hit hard by the property downturn, Kingspan has repositioned itself to take advantage of growing energy efficiency agendas, which Murtagh said enabled the company to eke out a niche sweet spot for itself in what are still subdued markets.
Murtagh said recovery was evident in the group’s businesses in the US, the UK and Europe but the Netherlands and its home market of Ireland were notable weak spots.
Ireland, which used to account for around 10 percent of turnover but has now dropped to five percent, is suffering from a drought of new building after a record property slump with refurbishments the only bright spot.
Overall, order intake in the second half has slowed from the first half but is still up on 2009, the company said.
British rival SIG said in July that sales would stay flat for the rest of the year.
Murtagh said he expected the group’s gross margin to drop a point or two in the short term on the back of rising chemical costs and volatile steel prices.
Kingspan’s operating profit hit €33.1m in the first half due to cost cutting and an improved sales performance in the second quarter, which more than compensated for a weak first quarter when harsh winter weather hit building activity.