‘Impact of global trade war could trump Brexit’
THE impact of a global tariff war would make Brexit “pale into insignificance”, Kingspan CEO Gene Murtagh told the Irish Independent yesterday
The risk of a trade war is a “much bigger issue than Brexit” because it will drive up costs globally and so reduce demand, the head of the Irish-owned, multinational construction supplies manufacturer said.
The tit-for-tat tariffs being imposed first by US President Donald Trump, and by other nations in response, are already heaping extra costs and red tape on cross-border business, he said.
And the situation is volatile. “It is very unpredictable. They can decide tomorrow on a new tariff and it’s in place by Monday,” Mr Murtagh added.
Citing an example, where Kingspan ships steel from the US to a plant in Canada to manufacture products for the US market, he said the advent of trade barriers this year means the administrative burden had become “mindboggling”.
The overall effect is to drive inflation higher, he said.
If the current trade war escalates, “Brexit would pale into insignificance”.
He was speaking after Kingspan announced a record €2bn in sales in the first half of 2018.
Shares in the Irish building materials firm surged 9pc on the better-than-expected profits.
That performance was boosted by greater than expected resilience in the UK and despite the hit from a dire and long winter that included the so-called Beast from the East snowstorms.
The shares bounce was partly relief that an expected worse impact of Brexit hadn’t happened, Mr Murtagh said.
Kingspan’s UK business is relatively self contained — making it potentially better-placed to cope with a hard Brexit, he said.
Kingspan does not yet have a “hard and fast contingency plan” for the UK’s exit from the European Union — because the business doesn’t know what form it will take, he said
“What I hope is that it’s a soft Brexit.”
While Mr Murtagh has previously warned that UK construction investment could be postponed in the run-up to Brexit, he said the British market was “particularly robust” in the second three months of the year.
The UK provides around a quarter of Kingspan sales.
It helped Kingspan report a 15pc rise in revenues and a 10pc rise in trading profit, compared to the first half of last year.
Acquisitions — including of Spain’s Synthesia group — contributed 15pc to sales growth and 12pc to profits growth in the period, it said.
Kingspan also entered the South American market last year with the purchase of Brazilian insulated panel company, Isoeste.
Revenue in Kingspan’s core insulated panels business was up 14pc, while insulated boards were up by 15pc.
In an analyst note, Davy Stockbrokers said trading profit was 6pc better than expected.
Goodbody said it now expects to upgrade its full-year trading profit forecast for Kingspan.
In Ireland, Kingspan said it recorded organic sales growth of 16pc in the first half of the year, buoyed by increased demand for its products from the residential construction sector.
Despite the pick-up there were no constraints in capacity to meet demand, Mr Murtagh said.
‘We don’t know what form it will take. I hope that it’s a soft Brexit’