* Year presents challenges, but conditions more predictable

Cyclical Consumer Goods

* Considering resuming dividend payment after debt reduction

* Shares up 11 percent to recoup much of last week’s fall

By Padraic Halpin

DUBLIN, March 1 (Reuters) – Irish building materials group Kingspan (KSP.I) said there were signs the construction sector was stabilising as the economies it works in climb out of a recession that sent its 2009 profits down an expected 60 percent.

Kingspan (KSP.L), the No.1 producer of insulation in Britain, Ireland, Canada and Australasia, said that although the year ahead still presented challenges, particularly in North American and Europe, conditions were becoming much more predictable.

Kingspan Chief Executive Gene Murtagh told Reuters he would be disappointed not to meet analyst forecasts for a narrower 10 percent fall in operating profit this year. [ID:nWLB8671]

Shares in Kingspan rallied 11 percent to 5.55 euros by 1031 GMT, helping claw back some of the 16 percent drop last week.

“They are talking about trading conditions stabilising and as an historically very conservative company, they wouldn’t say that unless there was evidence coming back into their various markets,” one Dublin-based trader said.

“They’ll hit the bottom in 2010 and can start to plan for growth again and the market likes that.”

HIT THE FLOOR

Kingspan, which makes construction industry supplies from raised access floors to timber frames, reported full-year operating profit of 62.7 million euros ($85.20 million) and revenue of 1.1 billion euros — a drop of 33 percent. The company said cost savings of 50 million euros offset the damage.

Murtagh said he expected to make further cuts of around 5 to 10 million, but that the group’s cost reduction programme was largely complete.

He said the toughest markets this year would be in central Europe and North America and that a severe winter had so far made western Europe very difficult to judge.

“It’s very, very hard to get any sort of solid handle on the underlying activity because of the weather. It’s virtually impossible to work on sites so far,” Murtagh told Reuters in an interview.

After almost halving its debt last year, he added that the group would be able to do a sizable chunk of its acquisition activity this year, some 150-200 million euros, without having to raise money.

The group said the strong balance sheet would also make it consider resuming dividend payments this year having previously said that this was unlikely.

Kingspan has repositioned itself to take advantage of growing energy efficiency agendas and increased regulatory standards in the construction sector and said initiatives in both continued to gather pace, playing into its hands.

Insulation rival SIG said in January it was also well positioned to weather the downturn, seeing a recovery in the sector later this year but only after further hardship over the next few months. ($1=.7359 Euro) (Editing by Jon Loades-Carter and Louise Heavens)