Insulation boss warms to his task

“People thought we were crazy — how could you leave China?” said Murtagh.

It is not a discerning market, added the Kingspan boss. “There would be versions of you popping up all around the place. And the clients weren’t prepared to value the differentiation.”

So the company left, and it has “no desire” to go back. China “is not on the radar”, he said.

Thankfully for shareholders, there have been plenty of other spots around the globe on the Kingspan radar. This year the company spent €460m on two acquisitions — Joris Ide in Belgium and Vicwest in Canada — which not only gives Kingspan a foothold in each company’s home market, but also a beachhead into two larger markets: France and America.

The company is building factories in Australia, Mexico and Dubai, and expanding in France, Belgium and Russia — “green fielding and upgrading”, as Murtagh puts it. Capital expenditure will be pitched at €80m a year for the next four years as Kingspan stretches out capacity.

The Melbourne factory will supply the Australasian market, which is currently served out of Castleblayney, Co Monaghan. Earlier this year, Kooltherm panels from Castleblayney were fitted on a new futuristic ski station in the Remarkables mountain range in New Zealand.

China aside, Kingspan uniquely is a global player in the insulation business, while all its competitors are regional or local. It has 77 factories spread across the planet. What makes the feverish activity all the more impressive is that Kingspan’s main market — the construction sector — is still subdued.

The company’s drive is a near evangelical crusade to convert the world to high-performance insulation, replacing older forms of the stuff.

“We set aside whether markets are going to go up, down or sideways,” said Murtagh. “For us, the fundamentals are, ‘Can we penetrate markets?’ It’s all about market share. If you stood back waiting to call the macroeconomic picture, you could be waiting for a long while.”

The Murtaghs are not standing-back types. Kingspan was founded in 1970 in Kingscourt, Co Cavan, by Gene’s father, Eugene Murtagh, then a 28-year-old engineer. Originally making steel sheds for local farmers, Murtagh discovered insulation panels on a trip to America in the mid-1970s.

When the company floated on the stock market in 1989, Kingspan was valued at £25m. Today it is valued at €4bn. Eugene Murtagh still owns a 17% stake.

Gene Jr, as he is known, attended boarding schools in Waterford and Meath, though many summer days were spent on forklifts in factories. He joined the company not long after finishing a degree in business studies at Limerick University, although he insists that his career path was not preordained.

He took over as chief executive in 2005 at the age of 33. It has been an eventful decade, characterised by economic boom and bust, yet most importantly the internationalisation of the business. When he took over in 2005, more than 90% of profits came from the UK and Ireland. The proportion is now headed down towards a third.

Murtagh is not going to claim the credit. The business is managed, he said, through a series of rolling five-year plans, updated and rigorously reviewed on a continuous basis. “Virtually everything we have done in the past five years is written somewhere in one of those plans,” he said. “What we will do in the next five years is in print somewhere now.”

Joris Ide, by a stretch the group’s largest ever acquisition at €315m, has been in quite a few Kingspan plans. The company first ran the rule over the business in 2002, and even completed due diligence. “For one reason or another, it just fell out of bed,” said Murtagh.

Since then, Kingspan has grown in Ireland, the UK and northwest Europe. Joris Ide, headed by its eponymous, entrepreneurial founder, expanded in Belgium and France, and opened facilities in Germany, Romania and St Petersburg in Russia.

Joris Ide Group is now 10 times bigger than when Kingspan first came calling. “I think that shows we might have been on to something,” Murtagh said. “What we have now is a very strong, compelling and complementary business.”

Since 2008, Joris has been 60% owned by private equity, which installed a team of senior management. Both Joris and Vicwest are “highly invested businesses, professionally managed”, which is how Kingspan likes it.

“We have a big emphasis on internal development, graduate programmes and developing our own layers of management,” said Murtagh. “But when we are acquiring businesses, we need to see skills in those businesses. We don’t have a people factory that will indefinitely develop talent.”

What Kingspan brings is a procurement and operational expertise.

Joris Ide and Vicwest are “fighter brands” which will take on different aspects of the market. Vicwest, which has 10 facilities in Canada, soon to be reduced to six, is strong in cold storage facilities, for example, which is not a particularly big part of Kingspan’s business. Joris makes smaller insulation products — again not part of the current Kingspan.

“The emphasis is converting the wider market,” said Murtagh. The plan is that there will be no building that the company cannot cover, from data centres to farm buildings.

Sold into construction projects around the world, Kingspan will remain the flagship brand. Pactiv, an American insulation panels business based in Virginia, was purchased last year, and has since been rebranded as Kingspan Insulation.

The main attraction here was “access to the design channel”. In America, where the take-up of high-performance insulation in buildings is 12% — compared with more than 60% in Britain — the challenge is to get the Kingspan product into the minds of those designing and planning new buildings and refits. “It’s all about education,” said Murtagh.

In Europe, where penetration is about 30%, the drive to convert is environmental. In America, traditionally, it has been more economic. He is not overly worried about low energy costs. At the height of the shale gas revolution, in the past three years Kingspan has enjoyed its best trading in America, growing annually.

Once the decision is made to go the high-performance route, Kingspan technology must sell itself. The company is an innovator, he says, in a sector not known for being “cutting edge”.

Innovation is “woven into the fabric” of the company from its earliest days, through necessity, as a means of “carving out a space” in the industry. “It’s not like we have 200 white coats out in the forest somewhere,” said Murtagh. “It’s not that kind of R&D. It’s what we do and talk about daily.

“It is market led. We suss out the appetite for a product, and then clearly we have the capability, significant chemical skills and building design skills to make that happen.”

The recent spate of acquisitions is designed at truly globalising the business, not just internationalising it. If a German car maker is building a new factory in Mexico, it can source the same insulation as it does in Bavaria. Kingspan is a global brand in construction, he said, “and in some markets the brand is bigger than the business”.

Murtagh insists the deals were planned and not opportunistic, yet the company has exploited the low-interest environment. Having hoarded cash in the downturn and refinanced its borrowings last year, its interest bill this year will be the same as in 2014, despite buying companies for €460m. The company is conservative financially. It has almost reached its debt ceiling, so the prospect for further deals looks remote in the short term. Debt still has to be repaid, Murtagh stresses, no matter how cheap the money. Yet the business generates cash at such a clip, debt paydown can be rapid.

Kingspan has raised capital from shareholders only once in more than 25 years — a IR£20m (€25m) placing to buy the British business Ward in 1997. “In theory we did not need to get public,” said Murtagh. “I wasn’t around when they made the decision, but I don’t think there are many regrets. It’s different to a private business. It opens more opportunity, it’s freer for shareholders to act as they wish, and in a private company you don’t often have that scope. There are negative aspects to being public, but these are well understood.”

Murtagh travels a lot, and given the scale of the group’s ambitions, this will not change. The new factory in Mexico is a potential springboard into South America. Brazil, despite its problems, is still an attractive market. The Australian factory will be a means of exploring southeast Asia — Indonesia, Thailand and Malaysia.

Kingspan has a small factory in India, yet it too is a frustrating market. The opportunity is enormous, said Murtagh, particularly on cold storage and transport, because food wastage is “horrifically high”. The authorities are slow to introduce new standards. “Everything just seems to take an age,” he said.

While insulation dominates sales, about 90% of the total, Kingspan also sells raised flooring and environmental products, such as rainwater harvesting tanks and solar panels. The flooring generates cash and environmental sits well with the core business. Both will remain in the group “as long as it is the best home for them”.

Ten years on, the job is still “a lot of fun”, said Murtagh, if “not wonderful every day”. The company is just more international. “Physical presence is a big part of how we manage,” he said. Visiting a factory in California is considered the same as visiting a factory in Cavan.

There is an active pipeline of deals, yet it is not an obsession. “ Doing deals does not really turn me on, it’s everything after that,” he said. “Spending money is the easy bit; making the return is the challenging part and the interesting part.”

The Life of Gene Murtagh

Age: 44

Lives: Dundalk, Co Louth
Family: Married to Orla, three children, 16 and 14 (twins)
Education: Gormanston College, Co Meath, and a degree in business studies at Limerick University
Favourite movie: One Flew Over the Cuckoo’s Nest
Favourite book: Animal Farm by George Orwell

Working life

We run the business though eight management teams and I will visit each team once a month, somewhere in the world. I would do 500-600 hours flying a year, but I am not the only one here doing that. I am monthly in the US. Australia two or three times a year, Europe and the UK all the time.

Downtime

Film favourite: One Flew Over the Cuckoo’s Nest

I don’t golf. I don’t have distractions apart from the family. One 16 and two soon-to-be 15s. A couple of years they will be gone, and there will be serious work to be done. No matter where I am, four or five times a week, I will go for a run or to the gym . You can run anywhere. In the winter, I will make sure I am close to a gym. The lifestyle is not good, but it does not take much to stay in shape. I read a lot of material in the job, but I am not a reader. I have a book on Genghis Khan my mother gave me that I plan to read.