Gene Murtagh of Kingspan: a bright start with 2% rise in pre-tax profits

Since the beginning of the year, the favoured metaphor of optimistic economic commentators has been that Ireland has "turned the corner". But the data has been mixed. The economy has begun growing slightly after two years of recession, yet unemployment remains stubbornly high at more than 14%; consumer spending has shown some signs of life, but dozens of companies are still becoming insolvent every month.
Last week afforded the opportunity to gauge where we are, with some major Irish companies reporting interim results for the half-year to the end of June.
So, after "turning the corner" are we on the road to recovery or just driving down a dead end?
Kingspan, the building products group, got last week off to a bright start with better-than-expected results, posting a 2% rise in pre-tax profits while significantly reducing debt. The group also forecast further improvement in the second half and paid its first dividend – though small – since 2008.
The buoyancy this pleasant surprise inspired in equities analysts quickly deflated when buildings materials giant CRH, the biggest and most geographically diverse company on the Irish stock exchange, disappointed investors with a 20% drop in earnings.
Worryingly, the group, which is a bellwether for the global economy, also issued a profit warning for the second half of the year, telling shareholders that earnings will drop another 10%.
Bloxham Stockbrokers called the results "clearly disappointing", while NCB put the stock on review for a downgrade while cutting its forecast. Citigroup's influential research team was also bearish, immediately slapping a downgrade to 'hold' on the group.
CRH maintained its dividend for the 27th consecutive year, but the company is clearly struggling as the US economy flirts with a double-dip recession.
With US president Barack Obama's housing market support measures lapsing in July, the true state of the American economy is beginning to show through and it looks sluggish at best.
"US recovery looks more fragile and delayed," said Citi analyst Aynsley Lammin in a briefing note last Tuesday. "One of our main 'buy' cases on the shares was US recovery but trading in July and August suggests that its timing has been pushed out and is more uncertain."
CRH had given cause for optimism with a spate of acquisitions in the US in the second half of 2009, but the flow of deals in 2010 has not been as robust as chief executive Myles Lee dared to hope early in the year, despite available cash and a good debt profile.
"It's a very negative read-through for the world economy," said Oliver Gilvarry, head of research at Dolmen Securities.
This is bad news for an Irish economy almost totally dependent on the strength of its exports. If the US remains weak, that is one major market that will be buying less.
The UK is also in danger of sliding back into recession. Germany is recovering strongly, but the rest of the eurozone remains very unsteady.
Closer to home, however, there are a few glimmers of hope.
Perennial basket-case Aer Lingus appears to be getting less-worse than usual, posting an operating loss of €19m, versus a €93m loss for the same period in 2009. Chief executive Christoph Mueller has managed, against stern opposition, to cram down staff costs while benefiting from lower fuel prices. Yields have improved too, as the airline has successfully repriced upwards while filling more seats per plane.
Insurer FBD is also managing to charge more as the decline in volume has slowed – good news for the company if bad news for consumers. Analysts were encouraged by its performance for the first six months of a tough year in terms of weather-related claims. Strong penetration in the Dublin car insurance market – new territory for the rural-focused group – points to future profit opportunities.
Glanbia then rounded off a busy week of results with a 51% rise in earnings on the back of a recovery in bulk dairy prices, showing the strength of Irish indigenous industry is where it always has been. If we could just eat and drink our way out of trouble, we'd have no worries.