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Investing.com -- Kingspan (LON:0KGP), the building materials manufacturer has announced plans to increase its investment in U.S. roofing and will ramp up its commitment from $1 billion over the next five years.
This additional $250 million reflects a potential entry into the U.S. shingle market, which is primarily focused on residential properties.
Current investments have been concentrated on non-residential roofing facilities in Maryland and Oklahoma, both of which are expected to begin production in 2026. The expanded investment aims to establish a "roofing mega-site" and create opportunities for cross-selling.
The North American residential roofing market is reported to be worth approximately $24 billion, with asphalt roofing shingles accounting for about 75% of this market.
The top three US roofing shingle manufacturers collectively hold an estimated 80% market share, including CertainTeed (Saint-Gobain) with about 25% share, GAF Materials (owned by Standard Industries), and Owens Corning (NYSE:OC).
Other participants in the market include Malarkey (owned by Holcim/Amrize), Atlas Roofing, IKO Group, PABCO, and TAMKO Building Products.
Analysts at Jefferies noted that the shingles market is known to be undersupplied. However, they anticipate questions regarding Kingspan’s ability to organically penetrate a consolidated market characterized by high barriers to entry.
These barriers, as cited by other market participants, include consolidation among distributors, established contractor relationships, and access to raw materials.
Larger players in the sector are increasingly focusing on selling integrated systems rather than individual products.
For example, about 80% of Saint-Gobain’s residential roofing sales are from systems, and Owens Corning is also seeing an increasing proportion from similar offerings.
Saint-Gobain is also expanding its shingle production in Georgia, which is projected to add approximately 3% to the industry’s capacity.
Jefferies analysts suggested that investors are likely to view the financial upside positively, anticipating a target of greater than 20% Return on Capital Employed (ROCE) within four years on the additional$250 million investment.
This could translate to more than 5% upside to the group’s Earnings Before Interest and Taxes (EBIT) by 2028.
Nonetheless, concerns may arise regarding the timing of this increased investment in the U.S. as investor sentiment reportedly weakens, along with broader questions about Kingspan’s longer-term strategic goals and whether greater diversification signals a different outlook on the growth potential of its existing product lines.