Kingspan's new financial facility comes as US expansion continues
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KINGSPAN was given a massive vote of confidence by the banking community in the shape of a new €330m financing facility which replaces one due to run out in 2009.
Coming hot on the heels of its $110m acquisition of the US company Metecno, the second largest manufacturer of composite sandwich panels in the US, the facility indicates that Kingspan is determined to continue with an aggressive expansion policy.
According to Davy analyst Flor O'Donoghue the new funding will leave Kingspan with access to banking facilities of over €450m.
No details of the terms or the cost of the new funding were disclosed, but it is understood the margin Kingspan will pay is around 1.1pc above base interbank rates, compared to around 0.5pc for its previous package -- an increase of 0.6pc.
This is a good deal in the current credit crunch climate and indicates the good standing of the company.
The acquisition of Metecno also underscores the fact that Kingspan is still determined to make a success of its entry to the North American market, where it was famously bitten when it bought the flooring specialist Tate back in 2000.
Metecno operates from three sites -- in Florida, Ohio and California. Metecno also comprises a leading architectural metal-wall-and-roof-panel-profile business, operating under the Morin brand, from two sites in Connecticut and California.
The acquisition gives Kingspan critical mass in the US at a time when demand for insulation products is expected to increase due to economic and regulatory pressures.
In the year to end June 2008, Metecno had revenues of $137m and profits of $15.5m.
Kingspan chief Gene Murtagh said he believed future opportunities should more than offset the current economic conditions in the US market.
"While composite panels have traditionally occupied only a very small position in the North American market, we believe that a combination of environmental and energy cost pressures, together with a market leading position, can pave the way for a growing penetration of this product range in the medium term."
Kingspan is well placed financially. Prior to this latest funding, analysts were of the opinion that it had entered this downturn with a strong balance sheet. Even after spending over €110m on acquisitions and share buybacks this year, Davy is forecasting that by year end net debt will be around 1.4 times earnings.
Other analysts are equally positive -- the group's shares are viewed as a "buy" by Goodbody Stockbrokers.
- Pat Boyle
