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Profit soars as Kingspan posts record €1.2bn first half revenue


Kingspan's CEO Gene Murtagh photographed at the Radisson Hotel at Dublin Airport.

Kingspan's CEO Gene Murtagh photographed at the Radisson Hotel at Dublin Airport.

Kingspan's CEO Gene Murtagh photographed at the Radisson Hotel at Dublin Airport.

Cavan-based insulation giant Kingspan has earmarked €20m for its initial expansion into Mexico - which it expects to enter in 2016 or 2017, according to chief executive Gene Murtagh.

The greenfield expansion was confirmed by the group yesterday as it posted record first-half results, boosted by acquisitions and favourable foreign exchange movements.

Revenue rose 39pc to €1.24bn, while its trading profits jumped 61pc to €111.7m.

Excluding currency benefits, revenue was 29pc higher, while trading profits were up 44pc on the same basis. Acquisitions contributed 26 percentage points of the sales growth, and 31 percentage points to the trading profit growth.

The overall performance was underpinned by strengthening UK and US markets for Kingspan, while there has also been recovery in other important markets for the group, such as the Netherlands. Germany and France are among its biggest markets in continental Europe.

Kingspan makes insulated panels and boards used in commercial and residential construction projects.

It also has an environmental division and a unit that sells raised access flooring typically used in offices.

Kingspan completed two significant acquisitions this year: the €320m purchase of Belgian group Joris Ide; and the €139m purchase of Canada's Vicwest.

The company also plans to install new insulated panel manufacturing capacity at plants in Belgium, France and Russia over the next two years.

Mr Murtagh said Kingspan has allocated €75m-€80m a year for capital spending over the next four to five years, which includes the start-up costs for its entry to Mexico.

"There were some bolt-on opportunities (in Mexico)," said Mr Murtagh, "but we haven't managed to unlock any of those. The investment at the start will be in the order of €20m. Naturally, over time that becomes larger as we expand the business."

Kingspan has also continued to eye opportunities in Brazil, he said.

"We haven't made any significant headway, but it's still very much in our thinking. Our ambition in Brazil would be to do it through an existing player and that just takes a bit of patience."

There are two reasonably-sized players in that geography, but Mr Murtagh said that the market "isn't huge" and not as well developed as in many other countries.

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Asked if Kingspan would consider a joint venture in Brazil, Mr Murtagh said the company has undertaken such agreements in the past.

"We would be prepared to go joint in some markets. We've done that in the past but it really depends on the specific opportunity."

Mr Murtagh said that Kingspan will spend time bedding down existing acquisitions before targeting any fresh takeovers.

The company also recently completed the purchase of SPU, a Finland-based rigid insulation boards business. It generates annual revenues of around €25m.

The acquisition represents Kingspan's first manufacturing presence in the Nordics. The business is currently being rebranded under the Kingspan umbrella.

Kingspan also has a nascent presence in the Middle East, with a facility in Dubai.

It said that the Gulf region was relatively slow on deliveries during the first half of the year, but a growing order book is likely to result in revenue improvement in the current half and in early 2016. It's also investing in a new insulated panel manufacturing line at its facility in Dubai.

David Holohan, the head of research at Merrion Capital, said Kingspan's results were "very good".

"The company is executing very well with margins expanding meaningfully along with the return on capital," he added. "Their focus away from emerging markets will bode well for them in the year ahead."

Shares in Kingspan closed down 4.9pc yesterday amid the global market rout. They've advanced over 51pc in the past 12 months.

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