Kingspan says expects lower earnings in 2008

By Jonathan Saul

DUBLIN (Reuters) - Irish building materials group Kingspan posted a 21 percent drop in first-half operating profit on Wednesday, and reaffirmed that it expected lower earnings this year.

Despite the outlook, shares in the maker of products ranging from insulation boards to timber frames rose over 5 percent on the better than expected results.

Kingspan said despite a slowdown in the major UK and Irish construction markets, particularly on the residential side, its businesses in western and central Europe had performed strongly in the first half, with solid progress in North America.

Operating profit for the six months to the end of June fell to 90.1 million euros (72 million pounds) from 114.2 million a year earlier. Basic earnings per share (EPS) were 41.4 cents, down 21 percent from 2007, but ahead of analysts' expectations.

"Near term, a contracting market, rising raw material costs, and a foreign exchange headwind all present challenges to the group," Kingspan said. "As previously indicated to the market, this will result in lower earnings in the current year."

Chief Executive Gene Murtagh told Reuters the group would be disappointed if earnings this year did not at least beat the lower end of analysts' forecasts. He declined to give specific guidance.

The average of nine analysts' forecasts on Reuters Estimates showed they expect EPS to fall to 77.4 cents this year from 110.5 in 2007. The forecasts range from 72.1 to 84 cents.

"Kingspan has managed the challenges it faces in the current year to date," NCB analyst John Sheehan wrote in a research note. "But we see the demand issue as likely to worsen in the second half and into 2009. We therefore remain cautious on earnings prospects."