INSULATION SPECIALIST Kingspan has said tightening markets and rising raw-material costs will hit margins this year.

The Cavan-headquartered multinational did not say how hard tougher trading conditions would hit earnings this year, but chief executive Gene Murtagh told The Irish Times that the group still expected to beat the most downbeat forecasts for its prospects.

“We would be disappointed if we did not exceed the lower end of what’s out there,” he said yesterday.

“There’s a range of forecasts out there but we expect to be at the right side of the lower end.”

Analysts expect Kingspan to deliver earnings per share (eps) of about 70 cent in 2008 compared with €1.10 last year.

The company’s first-half performance beat most predictions, but was down on the first six months of 2007. Eps was 41.4 cent in the first half, 20 per cent down on the 52.7 cent it delivered during the same period last year. Eps was between 4 per cent and 11 per cent ahead of most analysts predictions, with the exception of John Sheehan of NCB, who expected the group to deliver earnings of 41.8 cent.

Kingspan has operations in Ireland, Britain, Europe, the US and Canada.

It specialises in insulation and flooring products, which means it has an exposure to the construction sector.

Yesterday it reported that sales in the first half of 2008 were down 6.5 per cent at €849.4 million from €908.4 million during the same period last year.

Operating profit dropped 21.1 per cent to €90.1 million from €114.2 million.

The group is leaving its interim dividend unchanged at eight cent per share.

Increased raw-material costs, mainly for steel and chemicals,squeezed margins during the first half.

Mr Murtagh said yesterday there has been a timelag between the cost increases and passing them on to customers.

He added that the group’s ability to pass on these costs also depended on demand over the coming months. However, there was “an end in sight” to the increase in raw-material prices.

“I would expect steel to end the year flat or slightly down.”

The group has been working on cost-cutting programmes, which include consolidating manufacturing operations. Mr Murtagh said these would deliver savings of about €20 million a year.

Last week Kingspan announced that it had bought Metecno, the second-biggest insulated panel manufacturer in the US, for €75 million. Mr Murtagh agreed yesterday that the current climate meant the group was in a position to get value for money, and made it clear that it would continue to seek suitable acquisitions.

“We have the appetite and the funding capability. The targets are very specialised and particular.”

In a statement issued with the group’s results yesterday, Mr Murtagh pointed out that the need for building products that cut energy consumption was “now widely accepted”.