Kingspan plans to acquire at least one rival, says CEO

INSULATION AND energy conservation specialist Kingspan is likely to acquire at least one rival over the coming year, according to chief executive Gene Murtagh.

The company yesterday published results for 2009 showing that sales fell by one-third to €1.13 billion from €1.67 billion, while profit before tax dipped by 17 per cent to €56.7 million from €68 million.

A €140 million reduction in debt to €159.4 million halved the group’s debt-to-assets ratio to 28 per cent, and left it with extra cash resources. Mr Murtagh told The Irish Times yesterday that it has left the Cavan-based company with total “headroom of €380 million”, and added that Kingspan was likely to earmark up to €150 million of this for acquisitions.

He said the company could make either one substantial purchase or a number of smaller ones, depending on the opportunities that arise.

Kingspan has looked at a number of suitors, but has not found itself in a position to close a deal. “Some of them have gone on the market and gone off the market again, so there has not been any meeting of minds,” he said.

However, he added the company expects to do a deal at some point over the next 12 months, and that it would be in either mainland Europe or North America, the markets on which it is currently focusing its efforts.

The company has managed its balance sheet in a conservative fashion up this point, and its chief executive yesterday made it clear that this is not likely to change.

Its statement yesterday described trading conditions during 2009 as “hostile”. Insulated panel sales volumes were down 33 per cent in Ireland, Britain and western Europe, and 23 per cent in North America. They fell 25 per cent in central and eastern Europe, where the group began reorganising its business, a process it intends to complete this year.

Kingspan’s earnings per share (eps) were up 7 per cent in 2009 at 28.7 cent from 26.7 cent the previous year. This included a credit of almost €5 million related to currency swaps and the revaluation of a dollar-denominated loan. In the absence of those exceptional items, eps would have fallen by 4 per cent.

The company is not proposing to pay shareholders a dividend; it paid out eight cent a share in 2008. However, Mr Murtagh said that the group hopes to make a return to shareholders at the half-year stage, once conditions in its main markets continue to stabilise.

Capital spending came to €48.1 million last year, which included its purchase of Air Cell Innovations in Australia in December, as well as the completion of new plants in Ireland and the Netherlands.

For the immediate future, it has the capacity to support up to €2 billion in sales without making any further investment in its manufacturing facilities.

Commenting on the results yesterday, Mr Murtagh said there was “tangible evidence of stability emerging with conditions becoming more predictable in the recent past”.

Kingspan: 2009 results

Turnover: €1.13bn (-33%)

Pretax profit: €56.7m (-17%).

Earnings per share: 28.7 cent (+7%)

Dividend per share: nil (-100%)

SUMMARY

Sales fell as building continued to slump in its main European and North American markets during 2009, although margins improved in its access floors business.

The company continued to cut costs, making reductions worth €50 million during the year, meaning overall savings from the market’s peak in 2007 now come to €66 million. The company said yesterday that the process is largely complete.

It also halved debt to €159 million, leaving it with a stronger balance sheet than 12 months ago. Over the longer term, it has the scope to continue acquiring rivals in a market where it looks likely to get good value.