Kingspan predicts 33% rise in operating profits

Building products group Kingspan is predicting that profits from its operations will grow by 33 per cent this year.

The company issued a trading statement yesterday saying that it had strong double-digit growth in the first half of 2006.

"Momentum throughout the group has continued, with operating profit for the year as a whole expected to grow by approximately 33 per cent," the company added.

"Strong underlying markets, a contribution from acquisitions and a favourable material pricing environment contributed to the performance."

In 2005, Kingspan had operating profits of €145 million on €1.24 billion turnover. Pre-tax profits were €135 million.

Both operating and pre-tax earnings grew 40 per cent during the year.

This year the company spent €85 million on acquisitions. These are likely to generate about €100 million in annual sales.

The €85 million acquisition costs and capital investment of €60 million were the main contributors to its net debt of €160 million.

Kingspan says the acquisitions are effectively substitutes for capital investment and both increase its geographic reach and bolster its product range.

Its most recent deal was the purchase of a 51 per cent stake in a Turkish operator, Izopoli, late last month.

This will boost its production capacity in eastern Europe.

Sales of the Cavan-based group's products grew during the year.

"In particular, the insulated panels business led much of the advance, through both continued conversion in UK/Ireland and greater rollout of the products in central and eastern Europe," it says.

The group said its expansion into other markets would help compensate for an expected slow-down in the Irish market over the next two years.

During the year it also made its first move into North America with the purchase of a stake in a Canadian operator.

Kingspan also bought a controlling interest in a business in Australia, where the authorities are demanding that more buildings use fire-proofed materials.

Kingspan produces a range of panels for use in building, including insulated and fire-proofed products.

Analysts reacted positively to the news. Davy Stockbrokers said the group's predictions were 5 per cent ahead of its forecasts.

However, Dolmen's Stuart Draper noted the company was likely to see raw material costs increasing next year, limiting scope for margin growth.

Investors welcomed the firm's news, and the shares traded at €19.30 in Dublin yesterday after opening at €19.16.