Inside the world of business
Kingspan hoping to get in on the act with US energy Act
THERE ARE probably not too many Irish businessmen keeping a close eye on the progress of the Waxman-Markey Bill through the US Congress, but Kingspan chief executive Gene Murtagh is one.
Waxman-Markey is the American Clean Energy and Security Act, which looks likely to become law this year. It has four pillars: the one on which Murtagh is focused deals with energy efficiency. It includes provisions to increase efficiency standards in new buildings by 50 per cent from their current levels and to provide grants to improve household energy efficiency.
Insulation and energy-conservation technology, Kingspan’s stock in trade, will loom large in this. The Irish group’s purchase of Metecno in late 2008 means it is poised to take advantage of new regulations in this area, as that firm is the second-biggest player in the market in the US.
In October 2008, during the worst of the financial crisis, a number of Irish and international banks lined up to provide up to €330 million in credit to the Cavan-based group. They got involved on the basis that it was well positioned to cash in as governments moved to toughen energy-efficiency regulation for buildings.
Before Kingspan agreed the credit facility, analysts for one of the banks involved, BNP Paribas, suggested it was one of two companies in Europe best-placed to profit from the direction regulation was taking.
This may have been forgotten during the general financial storm that followed. But now that stability is showing signs of a return, and energy efficiency and conservation are high on regulatory agendas in Kingspan’s biggest markets – the US and Europe – the company is likely to attract further attention.
Add to that the fact that it responded to the recession by cutting costs and debt, to the point where it can fund acquisitions with its own money rather than the banks’, and it looks like one of the better bets to emerge from the downturn in a strong position.
Getting results
Three major players on the Irish Stock Exchange will report their 2009 results this morning. The financial performance of AIB, building materials group CRH and bookmaker Paddy Power will provide a useful insight into key sectors of the economy.
The markets will be watching AIB closely, the first major financial institution to shine a light on its full-year 2009 performance. Analysts are expecting a €2 billion operating profit but loan-loss provisions will reverse that to a pretax loss of €3.3 billion.
Of more interest will be the performance of AIB chief executive Colm Doherty, who will be giving his first update to the markets since taking on the role. Some brokers suggest he may announce a cost-cutting programme to position AIB for its leaner future. Whether or not that transpires, the market will be keen to hear how AIB plans to raise capital after it transfers its toxic loans to the National Asset Management Agency.
The former role of AIB and Bank of Ireland as market heavyweights has fallen entirely to CRH, which now accounts for one-third of the value of the Irish index. It flagged its results in a January trading update when it said trading was challenging. Since then, the weather in its key markets of the US and Europe has been horrendous, making an upgrade in CRH’s guidance unlikely.
The consensus seems to be that Paddy Power will report another year of revenue and earnings declines. The bright spot is likely to be its Australian investment, Sportsbet, which dominates the burgeoning online betting market online. With €75 million of net cash, the bookmaker is well positioned to diversify further away from the Irish market.
Today is probably the key day in the Iseq’s 2009 reporting season. With Davy Stockbrokers expecting Irish plcs as a group, excluding the banks, to report earnings 40 per cent down on last year, investors will be have to look to outlooks for crumbs of comfort.
Elan’s future health
Elan’s present may depend largely on the success of its multiple sclerosis drug, Tysabri, but its future is inextricably linked to the pursuit of therapies for Alzheimer’s. To that end, yesterday’s announcement of results from an albeit small trial are encouraging on two fronts.
Elan has bet heavily that the most fruitful path in developing treatments for Alzheimer’s rest in targeting amyloid-beta, a type of plaque in the brain believed to be associated with the disease. While the results released yesterday are far too small to be statistically significant, they do show that the company – along with partner Johnson Johnson and Pfizer’s Wyeth unit, with which it has been working – may be on the right track. After 78 weeks, they found that patients given Elan’s bapineuzumab had about a 25 per cent reduction in plaque compared with those on placebo pills.
Larger trials are continuing to prove the efficacy and safety of the therapy.
Of possibly more immediate significance was the success in using a neurological imaging technique to assess the effect of therapies on amyloid-beta deposits in living patients. Proving the potential of the imaging technique had been the central purpose of the trial. Until now, such assessment was only possible at autopsy.
With Elan forecasting a return to operating profit for 2010, the prospects for investors in what remains a high-risk game look better than they have for some time.
Today
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