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Profits boost for Kingspan as it eyes up Mexico expansion

By John Mulligan

Published 25/08/2015

Kingspan sponsors Ulster Rugby.
Kingspan sponsors Ulster Rugby.

Cavan-based insulation giant Kingspan, which employs 790 people in Northern Ireland, is planning an expansion into Mexico.

Chief executive Gene Murtagh said the firm had earmarked €20m (£14.7m) for its initial expansion into the Central American country, which it expects to enter in 2016 or 2017.

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

Full-year results for its Northern Ireland subsidiary Kingspan Environmental were published last week, with turnover up to £99.3m from £68m in the year to December 31 2014.  But pre-tax profits were down to £1.19m from £5.38m.

But for its parent company’s half year results, revenue rose 39% to €1.24bn (£0.9bn), while its trading profits jumped 61% to €111.7m (£82m).

Excluding currency benefits, revenue was 29% higher, while trading profits were up 44% 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 (£235m) purchase of Belgian group Joris Ide; and the €139m (£102m) 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 (up to £59m) a year for capital spending over the next four to five years, which includes the start-up costs for its entry to Mexico.

Mr Murtagh said: “There were some bolt-on opportunities [in Mexico], 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.

Mr Murtagh added: “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.”

Mr Murtagh said that the market “isn’t huge” and not as well developed as in many other countries.

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

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