Irish stocks fall on US sales and bank fears

IRISH SHARES tumbled again yesterday, with the Iseq index closing down 3.7 per cent as a drop in US retail sales and concerns about credit losses in the banking sector dragged down European bank shares.

The Irish stock market saw a further €2.2 billion wiped off the value of the listed companies, with the banking stocks hit the hardest.

Irish Life Permanent closed down 8 per cent, while Bank of Ireland sank 6.2 per cent, as negative sentiment took hold. AIB came off slightly better, losing 3.6 per cent.

Anglo Irish Bank, which had gained earlier in the day after a cautious but well-received trading statement, eventually closed down 2.8 per cent as the bad economic news in the US filtered across to European markets.

Building materials group CRH, the largest stock on the Iseq index, closed down 5 per cent. About half of the company's revenues come from the US.

After oil prices jumped $3 a barrel to $116 in New York, the airline stocks also suffered. Ryanair, another of the major stocks on the Iseq, plummeted 8.2 per cent.

Earlier in the day, shares in building products group Kingspan had plunged 8 per cent after a report by Goodbody Stockbrokers slashed earning forecasts for the company. By the close of trading, it had clawed back only some of the early morning losses and it finished the session at €7.13, down 6 per cent on the previous day's closing price.

Blaming the worsening conditions in the UK construction sector and lowered expectations for the Irish economy, Goodbody reduced its 2009 earnings per share (eps) estimates for Kingspan by 22 per cent to 62 cent, and cut its 2010 forecast by 28 per cent to 64 cent.

Goodbody construction sector analyst Robert Eason said Kingspan's medium-term growth prospects were underpinned by the company's ability to increase its penetration of its existing markets as well as entry into new markets, which he said could be funded by Kingspan's balance sheet, which is strong compared to its peers.

But a slowdown in the property market and margin pressures from higher input costs, primarily steel, mean the European buildings material sector faces "significant headwinds", he added.

"We continue to take a low conviction stance on the sector," Mr Eason wrote in the report.

Kingspan's share price will remain in the €5.25 to €7.70 range in the short term, according to Goodbody, but the company's medium-term prospects should see the share price reach €10.20.

"Overall, we are cautious in the short term, but remain positive on a longer-term horizon."

Kingspan, which manufactures insulation panels, office flooring, structural supports and storage devices for the building industry, will issue its results for the first half of 2008 on August 27th. Kingspan warned in May of "more challenging" trading conditions.